Embracing SR&ED Claims Via SRED Bridge Loans In Canada
OVERVIEW – Information on financing the SRED Tax credit claim in Canada. This bridge loan , prepared via your consultants SR&ED work provides valuable cash flow and working capital for Canadian businesses wishing to maximize the benefits of the program
SRED Financing , we can make the case, is really the after life of your SR&ED consultants claim that’s been prepared for your firm. We maintain that that financing of a SR&ED claim is really the last spike in the whole tax credit process… and its’s a positive one if you’re looking to recoup cash flow and working capital from your r&d developments.
The last few years have been somewhat tumultuous in the whole world of this type of tax credit. After a couple years of study some of the’ rules of the road were changed’ and the whole program, which delivered billions annually to Canadian business simply seemed at risk. But when the dust settled basic funding of your claim was intact.
The SRED process is a combined federal and provincial claim, and using Ontario as an example alone that province funds close to 1/4 Billion dollars in research tax credits annually .(By the way, another 400 Million dollars is funded for the film, TV and animation tax credits. These credits can also be financed. Given that sort of dollar commitment we’re wondering if every business owner/CEO of mfg companies wish they were in the movie business!)
How do basic SRED issues affect the financing of your tax credit? It’s safe to say, sticking to our basics, that you have to ensure you qualify, your application has to be correct, and you want expertise to maximize the amount of your claim given the somewhat changed new rules around the program.
While the program is administered by Canada Revenue it’s your firm or your tax credit consultant/preparer that must prepare and submit the claim SR&ED claims are for all size of privately owned businesses in Canada (public companies don’t participate in the non refundable process).
When it comes to financing your claim the role of the sred financing consultant is critical. Given the streamlined new process instituted by the government your goal is simple – clarify and maximize.
In Canada claims are financed in two manners –
1. A SR&ED bridge loan is created out of your already filed claim
2. A credit financing facility is created to fund your expenses that you intend to file and then fund via a SRED bridge loan
While some basic due diligence is always performed on your firm many firms that could otherwise not borrow elsewhere can easily get funding via their SRED Bridge loan. The fundamental reason is that the collateral for the loan is of course the SR&ED credit itself
Some other benefits of financing your tax credit claim? For a starter no payments are made during the whole time the bridge loan is in effect. Your financing costs are deducted at time of funding and realization of your approved claim. Additionally many firms that apply are early revenue, pre revenue, or no revenue as they are just starting to build their business. But the SRED credit can still easily be cash flowed.
So, should the after life of your SRED claim, i.e. the financing of it, appeal to your firm if it files and uses this popular program. It will if your firm wants to monetize your credit and continue to grow your business. Seek out and speak to a trusted, credible and experienced Canadian business financing advisor with a track record of financing claims who can assist you with your SR&ED credit finance solution.
Author: Stan Prokop – founder of 7 Park Avenue Financial
Originating business financing for Canadian companies, specializing in working capital, cash flow, and asset based financing. In business 10 years – has completed in excess of 90 Million $$ of financing for Canadian corporations. Core competencies include receivables financing, asset based lending, working capital, equipment finance, franchise finance and tax credit financing.
Info re: Canadian business financing & contact details:
7 Park Avenue Financial
Phone = 905 302 4171
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