SR&ED Financing – Why Wait For Your Cheque?

SR&ED financing is an incredible way of maximizing the whole Canadian SR&ED process in Canada. Of course Canadian business owners and financial managers can wait for their refund – there is certainly nothing wrong with that. However, if you choose to finance your claim now you can in effect continue to maximize the overall potential of this great Canadian program. Funds can be used for immediate purchase of equipment, allowing you to maintain your competitive market position – an excellent strategy might be to use a portion of the fund as a down payment on a lease or purchase of equipment, thereby reducing your overall borrowing cost. When we meet with business owners and financial managers one of the key questions we are always asked is how much money can be financed under a claim. That answer is that, in general, you can get 70% of your overall claim, which is, of course, the combination of both the federal and the provincial claims as a total. Since the claim you are financing is a cash grant, and non repayable the financing you receive under a SR&ED tax credit financing is yours for any corporate purpose. So typically the funds are used for working capital, purchase of new equipment, and even the repayment of any Canada Revenue Agency (CRA) arrears that you might have if you are in the unfortunate case of owing government super priority payments such as GST, Source deductions, etc. If you are in a position of financing two years of claim, which is the allowable backdating under the program, you can of course get immediate financing ( FOR THE 70%) of the total of the two years claims. That can be very significant dollars in some cases. So as an example, you have filed a SR&ED claim for two years, the current fiscal year and your previous fiscal timeframe. Let’s say those two claims total $450,000.00 as an example. So over the last two years you have expended 450k, (probably much more) on research and development. You have had your claim prepared by a competent SR&ED consultant, and are now waiting for you technical and financial audit, which are standard during the SR&ED process. So what is the option? As we stated it is a case of waiting, in our estimate between 3-12 months for your cheque, or, as we suggest for consideration, financing that claim now. Under of 70% rule you immediately obtain cash flow and working capital in the amount of $ 315,000.00 to use for general corporate purposes. When the claim is processed, approved and paid by the government you of course receive the balance of the 30% of the claim less financing costs. Financing costs are higher than normal business financing might be via your chartered bank, as in essence you are factoring a receivable that is due to your firm. In order to ensure a solid and easier financing of your claim we again re state the fact that it is good to have your claim prepared by an experienced person in this area – which in some cases, but certainly not always, be your accountant or C.A. firm. We say ‘ not always ‘ because SR&ED claims preparation and analysis is very industry specific and is not what we would call a ‘ core competency ‘of every C.A. in Canada, and that’s an understatement! PPI Claims wholesale scrubsBuy Wholesale Medical scrubs, Wholesale Nursing Uniforms, Wholesale Hospital Scrubs & more at Scrubadoo.com. FREE returns for 100 days, flat rate shipping, & great service for nurses, doctors, or wholesale scrubs for large groups!
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Six Words to Describe Business Financing

This report was produced in a direct effort to provide more understandable insights about some of the most critical business finance issues effecting commercial borrowers. Our approach in this report is to describe current commercial loan circumstances in six words. We have adopted a similar model in other commercial finance reports such as “seven words to describe commercial property loans”. The “simpler is better” perspective reflects the belief that after hearing an almost endless number of reports about commercial lending difficulties, what small business owners might really need is a more concise explanation about these problems and the resulting impact on their business financing options.

Before proceeding, it is important to emphasize that small business finance options are often more complicated than anticipated by many business borrowers. We are definitely not attempting to characterize business loans and working capital financing as either straightforward or simple. In fact, quite the opposite is the case. The unfortunate reality that most business financing processes have always been excessively complicated and that meaningful improvements are not on the way is one of our ongoing observations. We nevertheless feel that it is critical for each small business owner to have an absolute and total understanding of the entire commercial finance process in the face of the prevailing commercial lending complexity. To help in providing more understandable insights about commercial loans and business banking problems, this particular report is one of several thorough efforts on our part.

Our first example of six words describing business financing options is “banks are saying no more often”. For any small business owner still unaware of this harsh reality and who might doubt this observation, a series of candid conversations with other business borrowers will probably remove all doubts. The failure of banks to provide an adequate level of business loans on a widespread basis is the primary point to remember. It is important for small businesses to realize that they are not alone when they hear their bank say no to routine requests for commercial financing.

“Commercial property values have decreased dramatically” is a second observation. There are very few exceptions. The biggest business financing impact is likely to occur with commercial refinancing situations. Many banks are aggressively recalling existing commercial real estate loans and this literally forces a borrower to seek business refinancing even if a business owner has no interest in refinancing their commercial mortgage. With decreasing commercial real estate values, business refinancing will be a challenge for most small businesses.
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“Lines of credit are disappearing fast” is another six-word description of commercial financing. Even the most successful businesses need a reliable source of working capital financing, so this situation is especially serious if a business cannot replace bank financing when it suddenly disappears. Even if a business still has an adequate line of credit, it is important to realize that on a widespread basis banks are reducing and eliminating business credit lines with almost no advance notice.
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    Financing SR ED – Canadian Working Capital Solutions

    Financing SR ED – Not every Canadian business owner and financial manager who takes advantage of this Canadian program (often just called SR ED) program utilizes their capability of financing that claim and ensuring that non-repayable grant is converted into valuable cash flow and working capital.

    How does a firm tap into this cash? Funds from a SR ED financing can be used to bolster your working capital, reduce debt, purchase new equipment – in essence to continue to grow and profit your business.

    SR ED covers every industry in Canada and Canadian firms continue to generate the SR ED grant based on their research and development work on innovative processes, software, product development, etc.

    Many business owners don’t realize that a SR ED claim can be filed for any amount, it is not the domain of the large corporation. In fact large public corporations don’t even qualify for the non repayable cash grant aspect of a SR ED claim. Our firm as worked with and originated financing for SR ED claims as small as $ 30,000 and up to $ 1,500,000.00. The key point to remember here is that there is a cost and time element to the preparation of any SR ED claim, as the claim is usually most successfully prepared by a professional consultant or your firms accounting firm. Many SRED claims are prepared on a contingency basis – this continues to be a popular aspect of SR ED. The claim is prepared and documented with no risk to your firm from a cost perspective, and a portion of the final cash grant goes to the consultant who prepared the claim and invested time and cost in doing that. Clearly that’s a win win for all parties. We would also point out that no one is going to prepare, document and file your SR ED claim for you if they don’t have a strong belief that all, or a significant part of the claim wont be approved.
    We always over emphasize to clients that they can use this financing for any general corporate working capital purpose. It is ironic but we often work with firms who have some arrears with CRA (aka ‘Revenue Canada) and the financing is used to offset their tax arrears. Naturally that’s not the optimal use of working capital, but it certainly clears up a serious tax and financial statement problem.

    Many Canadian firms are first time claimants. Those claims can of course be financed also – we simply encourage clients to ensure they have filed a valid claim with respect to documenting their research. Companies often ask us how much financing can be derived from a claim. In general the amount is 70% – By that we mean that if your claim is $ 100,000.00 you generally received 70,000.00$ on financing of the claim, and the balance, less financing costs, when the claim is adjudicated and approved.

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