You decide. Does your firm want to consider the benefits of a SR&ED tax credit loan? If you participate in Canada’s sr&Ed program you are immediately eligible to consider financing that claim. Lets looks at why that might make sense, what are some of the benefits of monetizing your sred grant, and, finally, how exactly do you do that?
Any firm that has filed a sred claim via their own preparation, the utilization of a sred consultant, or through the use of their accountant has probably quickly picked up that billions of dollars every year are allocated to this program.
By participating in the program your firm is eligible for the non repayable grant on which the entire program is based.
So you have filed a claim. You are now in the waiting game process, as your claim has to be acknowledged, audited, and then processed for a refund cheque. When we talk to clients about what they will use the funds for a number of scenarios emerge – some firms hire additional staff, others , not surprising re invest in the entire r&d process to maintain their competitive posture within their industry .
In sharing our information on our sred subject we are making the assumption your firm knows about and is maximizing the program. As a sr&Ed claimant your firm develops or improves existing products, develops new ones, or invested in various process improvements via a trial and error type scenario.
So where are we at – we’ve simply re enforced the fact that your firm is aware of the program, it participates, and, via your sred consultant or accountant you are maximizing your eligibility for the maximum refund possible.
Cash is king, and you have spent a lot of your cash on the actual R&D involved in the program. Your firm has the option of financing your credit, as soon as it is filed. Clients are often confused about the financing of their claim – basic questions always seem to be – how much does it cost, is my firm incurring debt that I do not necessarily want to take on, and how long the process takes to finance such a claim and whats involved.
Let’s cover off those key points, which should allow you determine if you should consider financing your claim. We’ll also throw in a few tips around maximizing your financing should you choose to proceed.
SRED financing of your sr&Ed tax credit is somewhat of a boutique finance industry in Canada. It is very rare that your bank will finance the claim. We certainly don’t agree with that, because in effect it is an account receivable, and they do finance receivables, don’t they??! Anyway, your firm will have to have a strong borrowing relationship with a bank to finance your claim. The reality is that this type of financing is best and more quickly achieving via a sred financing specialist.
Rates for sred financing vary, and factors that affect the rate tend to be size of claim, your company’s current financial position ( many sred claimants are early stage, pre revenue, etc ) , as well as the perceived quality of your claim .
A sred loan is not debt per se, that’s important to understand, you are simply monetizing, or ‘ cash flowing ‘ one of your receivables, in this case the sred . Sred loans are structured as no payment loans and the final financing charges are simply deducted from the final cheque you receive from our good friends in Ottawa.
Sred financings can be processed, and funded in as little as two weeks – very standard application paperwork is involved, and the main collateral is or courses the sred itself.
Here’s some final tips we promised – have your sred prepared by someone who knows what they are doing, sred consultants are the best in this area as they are specialized. Count on receiving at least a 70% advance on your claim. Also, did you know that under certain conditions your sred can be financed prior to filing?
We’ve e shared some tips and procedures that will allow you to consider financing your claim. If additional cash flow and working capital are important considerations speak to a trusted, credible, and experience business financing advisor to validate your sred loan options.