Did you as a Canadian business owner or financial manager file SR ED claims on an annual basis? First of all, if you are eligible and you have not, you should be! But that is a conversation and discussion for another day.
For Canadian firms who file SR ED claims the claim can be financed .Why finance your SR ED claim. Obviously if your firm has a heavy investment in research and development, and you are in fact taking advantage of the Canadian governments most popular program ( Over one and half billion dollars are awarded annually to Canadian firms ) then why not consider monetizing that investment into much needed working capital and cash flow . Many companies that we have worked with count on the SR ED claim as one of their largest sources of revenue and cash during the year, particularly if your firm is a smaller firm or a firm considered to be in ‘ start up ‘ business phase.
If you are looking for a SR ED financing solution, commonly also know as a ‘ SR ED LOAN ‘ , then here are the basic facts that you should be aware of .
The SRED is the acronym for the Canadian governments SCIENTIFIC RESEARCH & EXPERIMENTAL DEVELOPMENT program. The program is sponsored by the federal and provincial government and allocates well over a billion dollars a year per annum to Canadian firms who are going through some form of research and development process.
So now that you have filed your SR ED , probably with the assistance of a qualified firm or consultant you begin the ‘waiting process ‘ as the federal government reviews your claim, prepares to potentially audit your claim, and then , yes, you know what is next – ‘ the cheques is in the mail !”
Depending on the size of the claim, whether you are a first time filing firm for your SR ED grant, or if your claim is perhaps somewhat very technical in nature you may wait for up to a year for your funds. Why wait for your funds when you can monetize the claim today and re – invest that cash flow and working capital into your company today – into more r &d, and general working capital purposes.
Claims in general are not financed by Canadian banks – by virtue of the very nature of the program your claim could be partially disallowed, and in much rarer cases, totally disallowed.
You should therefore enlists the services of a firm who is knowledgeable in SR ED tax credit financing and ensure you can quickly, ( usually within two weeks ) obtain financing for your claim .
Let’s discuss some of those financing basics: They are as follows – claims are generally financed at 70% of the value of the claim you have filed. Rates are quite higher than normal bank financing rates, but let’s remember this is a non repayable grant from the government – if you can finance your claim, take those non repayable funds and continue to grow your company, well, it seems to us that’s a good thing! Right?
Once your claim is submitted, as well as standard application form data – (comapny history, your current financial situation, any other extra ordinary events around your firm, etc) the claim is financed and cash remitted to your firm.
Use your SR ED tax credit as a valuable alternative financing method in the challenging financial environment we find ourselves currently in. S R ED and cash flow coming in let your firm benefit also!