The SRED Business Credit : The Case For Financing Your SHRED Refundable Tax Credits In Canada
OVERVIEW – Information on how claimants in Canada’s SR&ED refundable tax program can justify financing their credits to accelerate the cash flow benefits of their r&d spend
A SRED business credit replenishes the cash your firm has spent on qualified expenditures under the SR&ED refundable claim program in Canada – however that only happens when you receive your govt cheq for ‘SHRED’ refundable tax credits. That’s why we make the case to finance your claim to shorten that whole process – it’s our mini version of ‘money is no longer an object’ so to speak. Let’s dig in.
Any external funding that helps a business survive, compete and grow is a valuable commodity… Whether your firm is in early stages of development, early stages of sales, or fighting a head to head battle with your competitors it’s almost always about ‘ cash flow’.
Many business owners/managers that file SR&ED claims might not be aware that the program is pretty well the largest ‘ direct support ‘ ( direct support = cash!) program in Canada, providing billions of $ for any firm that qualifies and files.
Since you have no requirement to repay these funds to the govt it seems that it makes even more sense to monetize your claim as quickly as it possible – taking full advantage of the unique structure of SR ED financing loans.
How do these loans work? The concept of a SRED BUSINESS CREDIT loan is essentially a ‘bridge loan’, carrying you over for the full duration of the waiting that comes with any govt process. That is not to say the govt hasn’t been committed to speeding up the process. They’ve simplified the application process, scrutinized more effectively the folks that prepare these claims for you (aka ‘ SR&ED Consultants), and even committed to specific timelines around processing, auditing, and paying your claim.
Having said all that your firms R&D process can well take the better part of a year. Then your SRED Consultant prepares and documents your claim. That claim is filed along your annual financial statements. So it’s not hard to see the benefits of financing your claim, which, by the way can be also financed prior to filing, and financing can even commence on next years claim if you should so choose.
We spoke of ‘ SHRED CREDITS’ being financed via a type of bridge loan process. Let’s recap that process. Once the total value of a claim is determined by yourself, your accountant, and your SR ED consultant a financing offer is issued, typically for 70% of the total amt of your claim. (That covers both the fed/prov portions of the tax credit.
The essence of the collateral of the loan is of course the SR&ED credit itself. That again raises the point of the role of a qualified and reputable consultant, as the lender is relying on the legitimacy of your claim. During the last several years many less than reliable Sr ed consultants have been slowly weeded out of the industry.
When you receive your funding under your financing claim no payments are made for the duration of the loan. That lack of cash outflow simply strengthens the case for financing a refundable tax credit under the program. By the way, when the govt funds your claim you immediately receive the balance (i.e. 30%) of the refund, less financing costs that accrue along the way for the loan.
If you think the case can be made for financing your SRED Business 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 to monetize SHRED refundable tax credits for value cash flow – our version of ‘ money is no longer an object!
Author Stan Prokop – 7 Park Avenue Financial :
http://www.7parkavenuefinancial.com 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 FINANCING EXPERTISE
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