Only in Canada…and that’s the truth! We are the only country in the world that actually pays you in cash for your Science, Research, and Experimental Development. Nice. Here’s the bonus though…a company can capitalize their past fund-able efforts in SRED(bonus bonus – accrual too..) and receive cash funding immediately – post AND pre application. A company’s cash flow can be expedited and they do not have to wait until the gov’t has reviewed their claim and approved before receiving their funds.
There are other tax credit claims you can monetize now too. Film and animation also has grant funding programs fully financible now too, not later after it’s reviewed and authorized by a government body that can take months. And, do forget mining credits also…yes, realize your capital today…almost as fast as you’ve invested.
Financing your SR&ED claims could not be simpler. And the good news is there are more innovative products coming on board all the time – including what we could term SRED LINES OF CREDIT, aka Accrual Sred Finance.
The mechanics of financing your SR&ED tax credit work like this…. After your claim is prepared (typically by your own firm or a SRED tax ‘ Consultant’) it is filed along with your corporate tax return. The minute that happens (tax return filing) it is immediately eligible for financing. Typically banks in Canada do not finance these credits directly, but there are exceptions.
Non bank SRED FINANCING works like this – your claim is financed to a maximum of 70% of the rebatable amount. Simply speaking on a $300k claim you are eligible for $210k of immediate funding. The financing of your tax credit is best described as a bridge loan -your company does not make any payments for the duration of the claim, and when it’s approved by the government you obtain the balance of the funds, less financing costs that accrued during the loan period. Just to close the gap, your company receives upon approval by the federal program the $90k remaining less the financing fee’s – the monthly percentage charge subtracted since the ‘bridge’ loan was financed.
One unwritten benefit to SRED financing is that your company neither takes on any new equity or debt financing while obtaining cash flow now. AND…it does not impede other borrowing nor does it secure against other assets, over and above the tax credit claim itself.
Regarding Film and animation – If you’re a producer or owner of projects in the media and entertainment industry tax credit financing may be for you too. It’s another major financing category of tax credits financed, in addition to those SRED credits. Although this is a highly specialized form of tax credit it only takes a legitimate project, an expert tax credit accountant (they prepare and itemize your claim including procuring your ‘certificate’) and you’re able to access the same financing as SRED claims.
Provinces such as British Columbia, Alberta, Ontario and Quebec garner most of the tax credit action, and although there are some differences in amounts qualifying suffice to say that these media credits are very generous, and are very finance-able. Foreign producers, primarily U.S. based, can also access these credits for productions ‘made in Canada’ as long as they qualify under a simple point system for what is known as co-ventures. Points accrue for having a Canadian producer, how much you spend, etc.
Contact an experienced, professional tax credit financing specialist to monetize your rebates now – you dont’ have to wait for CRA to approve you. greg@7parkavenuefinancial.com