OVERVIEW – Information on financing ( sr&ed) SR ED Tax Credits in Canada. A SRED Credit loan allows Canadian business owners to accelerate r&d capital spent on research under the Scientific Research and Experimental Development refundable tax program
Financing SR ED (SR&ED) tax credits is the finality that comes from filing a SRED claim in Canada. So the question that remains to be asked is ‘ Does it pay to finance your refundable credit under Canada’s most popular research refund program? Let’s dig in.
In recent years the program has been a moving target by the government whose goal it was to maximize and yet simplify the program in order for Canadian business to achieve the benefits for which the program was originally derived.
In order to understand the benefits of financing your SR&ED credit it’s necessary to step back and understand the origins and intent of the program. In reality the program has been around for almost 30 years now. While the name of the program is somewhat daunting (‘SCIENTIFIC RESEARCH AND EXPERIMENTAL DEVELOPMENT”) business owners and managers simply call the program ‘ S R E D ‘!
The actual preparation of your claim is very much tied to success in financing your claim. We would maintain it’s much easier to finance your refund than prepare it! It is up to the owner/manager to ensure that the refund claim they prepare is ‘ eligible ‘ under Canada Revenue Agency (‘CRA’) guidelines.
These days probably 99% of all claims are prepared by the folks known as ‘SRED consultants ‘ – these people are typically steeped in either industry or actual program experience, many of whom have worked for CRA in the past. A part of the ‘ turmoil ‘ in recent times, some of which has led to financing confusion of claims relates to how these consultants who prepare claims are compensated. That compensation relates to the contingency fees that have consultants prepared those claims at their own cost, risk and expense.
That compensation was one of the main reasons that the Govt undertook a few years ago to fairly radically revamp the program. Some previously eligible expenses were cut back, businesses must now identify who if preparing their claim and how they are paid, etc. Additionally some key aspects of the program – i.e. the ability to claim capital equipment purchases used in research were eliminated.
It’s pretty clear now that in order to be successful in financing SR ED tax credits and obtain a SRED credit loan that the quality of your claim is key. Business owners and financial managers using qualified and credible / experienced consultant will continue to benefit from the program.
That brings us to our key question – recognizing the benefits of the finance of a SR ED refund. That one benefit – Accelerated cash flow. Claims are typically financed at 70% ‘ loan to value ‘- meaning simply that for example a 200k refund would provide a loan of 140k.
Loans must of course be repaid! , but SR&ED financing is done via a bridge loan with no payments required for the duration of the loans – another key benefit . When your claim is approved and funded by the govt you receive the 30% remaining balance immediately, less financing costs.
While the govt was busy re doing the program a bit the SR ED financier has also been working – to add even more creative features to the cash flowing of your claim – these include facilities such as a SRED credit line, and even the financing of next years claim .. Today!
So, if you want to be like or business owner who has found it does pay to finance your SR7ED refundable tax credit seek out and speak to a trusted, credible and experienced Canadian business Financing Advisor with a track record of success who can assist you with your SRED credit loan needs with a viewpoint to maximizing cash flow and r&d expense recovery .
AuthorL 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 90 Million $ of financing for Canadian corporations . Info /Contact :
7 PARK AVENUE FINANCIAL = CANADIAN SR&ED TAX CREDIT LOAN EXPERTISE
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