OVERVIEW – Information on financing SR&ED refunds in Canada. Financing SRED claims via a ‘ shred’ tax credit loan enhances valuable cash flow acceleration , allowing businesses to put funds to any general corporate purpose
Financing Sred claims in Canada often seems to require an ‘ explainor ‘ for numerous firms we meet who either didn’t know a ‘ SHRED ‘ tax credit loan is available, or, equally generating curiosity… how is such a refund financed. (Spoiler alert: Financing SR&ED claims couldn’t be easier) Let’s dig in.
Yes, correct… its no ‘ optical illusion ‘ .Those funds that just arrived in your company’s business bank account are the proceeds, today, for your refund you have been waiting… and waiting for. Finally this federal tax incentive makes more sense than every, and the ultimate benefit of the program – the cash flow refund is enhanced by the financing of your claim.
It should be common knowledge that Canada’s ‘ Scientific Research and Experimental Development Program ‘ (aka ‘ sred’ ‘sred’ ‘ sr ed’ ‘ shred’ ) benefits private non pubic companies of any size – from start up to large corporation. It’s probably obvious to all that the cash flow generated from the SR&ED refundable tax credit is probably a bit more important to early stage firms, who often rely on this cash refund as a major component of their financing, and R&D commitment.
You of course maximize these claims for qualified expenditures typically with the assistance of qualified SR&ED consultants who have the ability to format and help file your claim under current guidelines. Though not a key factor suffice to say that the quality and reputation of the SR ED consultant you engage is one ‘ positive check mark ‘ in financing your claim , as their reputation simply enhances the probability of a full refund .
So let’s circle back to the actual financing of your claim. Three key things to keep in mind:
1. You should probably only consider financing your SHRED Credit if there is a need for funds. If you have no reason to accelerate cash under the program why would you take on a short term obligation? If you are filing late, or require financing for next years R&D issues like that make it a positive consideration for a SHRED Loan.
SRED loans are bridge loans, short term in nature, that collapse as soon as the govt issues your refund cheq. Loans are typically 70% of the value of your total fed/prov refundable credit, and no monthly payments are made for the duration of the loan. Recipients receive the balance of the refund, i.e. the other 30%, less financing costs, when the govt remits your refund.
The main collateral for the loan is of course your actual refund credit.
2. Timing – most firms should be able to get a strong sense (via consultation with their accountant/CRA advisor/Sr ed Consultant) as to the timing of their claim. If you determine that refund might take months or in some cases the better part of a half year/year that’s when financing might make most sense from a cash flow needs perspective. It’s all about putting funds to use today as opposed to waiting!
3. Dealing with the right lender. SR ED is niche financing and it makes sense to deal with a trusted, credible and experienced Canadian business Financing Advisor with a track record of success who can ensure your financing requirements are met.
There’s your ‘ explainor ‘on the merits, issues, and mechanics around financing SR&ED refundable credits in Canada.
Stan Prokop – 7 Park Avenue Financial :
Business financing for Canadian Firms , specializing in working capital, cash flow, asset based financing , Equipment Leasing , franchise finance and Cdn. Tax Credit Finance . Founded 2004 – Completed in excess of 100 Million $ of financing for Canadian corporations . Info /Contact :
7 PARK AVENUE FINANCIAL = CANADIAN SHRED TAX CREDIT LOAN EXPERTISE
7 Park Avenue FinancialSouth Sheridan Executive Centre
2910 South Sheridan Way
Office = 905 829 2653
ABOUT THE AUTHOR:
Stan has over 40 years of business and finance executive experience. He has been recognized as a leading credit/financial executives for three of the largest technology companies in the world; Hewlett-Packard, Digital Equipment and Cable & Wireless. Stan has had in depth, hands on experience in assessing and evaluating thousands of companies that are seeking financing and expansion. He has been instrumental in helping many companies progress through every phase of financing, mergers & acquisitions, sales and marketing and human resources. Stan has worked with startups and public corporations and has many times established the financial wherewithal of organizations before approving millions of dollars of financing facilities and instruments on behalf of his employers.
‘ Canadian Business Financing With The Intelligent Use Of Experience ‘
7 Park Avenue Financial
Canadian Business Financing