Information on tax credit financing in Canada. SR&ED loans can play a valuable part in refundable tax credit finance . Here’s information on why businesses committed to R&D Capital Investment should consider SRED Funding
Not everyone Canadian business owner or financial manager takes advantage of the Canadian Governments SR & ED (Scientific Research & Experimental Development) tax credit program. It’s clearly in our opinion of the best and truly legitimate and valuable programs that a government provides for its business entrepreneurs in Canada.
Many, when they hear of the program for the first, are amazed that they can receive significant funds, that are non – repayable (yes that’s non -repayable!) for their ongoing investment in research, product development, business processes, etc.
And, those that do take advantage of the program dutifully wait many months, in some cases a year or so or more for their cheques from the provincial and federal government.
Why not borrow against these funds and utilize those funds for much needed working capital and cash flow to further fuel the growth of your firm.
SR & ED financing is still relatively unknown in Canada – it is clearly a very specialized type of financing, somewhat ’boutique’ let us say, in nature.
The government, via the program, wants to provide funds to Canadian business so they can continue to further their research and development and provide Canadian firms with a lead in technology and business.
So lets get back to the financing of the SR ED, aka ‘ SHRED ‘, aka ‘SR &ED’. SR ED Loans are typically for approximately 70% of your combined federal and provincial claim. The claim can be financed as soon as you have formally filed the claim with the government, which is at the same time you do your year end tax filing.
SR ED applications can be filed for the last two years, so on occasion your firm might in fact have a significant receivable generated by virtue of that filing you have done. Our observation is that some companies actually book that receivable in their financial statements for the full amount of the claim. Some companies take the conservative approach and only record the cash coming in when it is received from the government.
So, you as a business owner or financial manager of a Canadian company are asking yourself the obviously – if I book the SR ED as an account receivable, will my bank provide financing for it. Our experience is generally ‘no ‘they will not. Canadian chartered banks, being somewhat more conservative in nature, recognize the SR ED claim may or may not be approved. So if there is any risk in your financial structure as viewed by the bank they will not advance funds.
The private sector of Canadian finance is in fact doing the SR ED financing. Claims are financed on the basis of your firms overall financial status, although we add that even pre revenue companies or companies that are losing money can still obtain SR ED financing.
Every Canadian firm that files a SR ED claim should consider financing the claim if they feel the additional cash flow and working capital will assist their company in continued growth and success. Talk to an expert and use this alternative financing as a great way to boost cash flow.
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ABOUT THE AUTHOR
Stan has had a successful career with some of the world’s largest and most successful corporations.
Prior to founding 7 Park Avenue Financial in 2004 his employers over the last 25 years were, ASHLAND OIL, ( 1977-1980) DIGITAL EQUIPMENT CORPORATION, ( 1980-1990) ) CABLE & WIRELESS PLC,( 1991 -1993) ) AND HEWLETT PACKARD ( 1994-2004 ) He is an expert in Canadian Business Financing.
Stan has over 40 years of business and finance executive experience. He has been recognized as a credit/financial executive 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.
7 Park Avenue Financial
Canadian Business Financing