Tweet

Small business financing - tapping into Ottawa\'s R&D tax incentive program

Guest post by: Lionel Perez

Article Overview: SRED is known as the Scientific Research and Experimental Development (SR&ED) Tax Credit program. According to the Canadian Revenue Agency - the SRED program is meant for the businesses that conduct research and development in Canada. It is the largest source of funds from the government in regards to R&D programs that supports industrial research. This article outlines the SRED eligibility requirements for small business.

Small business financing - tapping into Ottawa\'s R&D tax incentive program

SRED is known as the Scientific Research and Experimental Development (SR&ED) Tax Credit program. According to the Canadian Revenue Agency - the SRED program is meant for the businesses that conduct research and development in Canada. It is the largest source of funds from the government in regards to R&D programs that supports industrial research.

In terms of the amount of credit received, the SRED program offers:

• For a Canadian controlled private corporation (CCPC), they can earn a 35% federal credit on their first $3 million in R&D expenditures.

• For large companies that exceed certain taxable income or capital limits, the federal credit drops to 20%.

For a small business, this means that you can claim up to 65% of your engineering team\'s overhead - especially those involved in R&D. As an example - if you spend $2 million in salaries for your R&D team, you receive $1.35 million refundable tax credit, when the overhead rate is included in the calculation. So when you are considering outsourcing your R&D, consider that the government will pay YOU money to keep the intellectual research in-house!

What qualifies for the tax credit?



To determine whether your company qualifies for the tax credit, ask yourself these questions:

• Do you deal with challenges of a technical nature - software, hardware or industrial.

• Did you spend money to solve the technical obstacles?

If you said yes to both questions, you qualify for the credits. They can also be claimed on any work that meets these criteria:



• Experimental Development- to create or improve materials, products or processes.

• Applied Research- to advance knowledge with a specific application.

• Basic Research - to advance knowledge without a specific application.

• Support work for the above.

As you can see, the scope of what can be claimed is broad and could probably apply to most Canadian business.

Tech company start-ups know that they can file for the SRED claims, and for many, these refunds help them get through to the early stages of the company. Almost all of a start-up\'s expenses can be claimed for R&D credit and are highly encouraged. This doesn\'t mean that engineering, architectural, and programming firms cannot apply for the SRED credit, even if they are under contract from clients. They should be filing their claims immediately if they have been contracted to provide R&D services.

Check the Canadian Revenue Agency site, as it has all the information regarding contracting for services, including contract requirements. The best way to determine if you qualify is to download one of their industry specific guides that will outline the SRED application process.

Related Articles
  Companies Use Incentive Programs for a Variety of Reasons.
  How to use incentive marketing effectively
  How to use corporate incentives to reward and motivate
  Corporate Incentives Build Employee Retention
  How to use customer incentives to dramatically increase customer loyalty
  How to build customer loyalty
  Dealer Incentive Programs
  What’s So Little About the Small Business Government Loan In Canada ! SBL Guaranteed Financing
  Why Is The Canada Government SBL Loan For Small Business A Canadian Success Story
  Use Canadian Film Tax Credit Policy for Successful Financing and of Film , TV , And Animation Projects
  How To Qualify For Sred Tax Credit Financing and Why Sr ed Program Cash Flow works!
  The Power Of The Government of the Canada small Business Financing Loan - SBL 101 !
  Why The Canada Film Tax Credit Program Is Critical To Your Film Financing
  Finding Information on Small Business Loans
  Learn how to effectively utilize employee attendance incentives
  7 Myths Of The Canada Government Small Business Loan – Mom Never Told You This!
  Secrets On How To Crack The Government Of Canada Small Business Loan Financing Program
  SRED Financing – SR&ED Finance Loans in Canada
  Why You Need Film Tax Credits and Why the Canada Film Tax Credit System Works For Your Project
  Navigate the Canada Small Business Government Loan - Successful SBL Financing

Article Tags: applied research, Canadian business, Canadian Revenue Agency, CCPC, experimental development, RD, small business, SRED, startups, tax credit



Related Forum Posts
re: restaurant start-up - I'm not sure about government grants for restaurants, but my recommendation would be to approach a lender that offers loans under the Canadian Small Business Financing Loan program where the government will guarantee 85% of the loan. You can borrow up to $250,000 to finance equipment and renovations under this program. Restaurants are very risky business, however some of the Chartered Banks will look at restaurants if there is enough of an initial equity investment and you have a solid business plan (experienced management team, good concept and strategic location).
Its About the Right Money Option - Having the right partners and financing are so important. Locking yourself into a deal with the wrong partners can easily drag you and the business down. Also, great points about finding financing and other partners who understand the goals you have for the business and can help you work toward those. I've been amazed over the years to find the ways to network and to help others. Your financing partner can not only bring money to the table, but connections, information and the background to take the business to the next level. And, since they have money involved, its in their interest to help you make the business a success. ChrisH
Re: SEEKING PRIVATE OR ANGEL INVESTOR - Definitely have a thorough and accurate business plan. In the US, you can get help at SCORE - their website is full of great information and you can check for local chapters. If you would like a book that has all kinds of great information about financing options - this one is very good --- HOW TO GET THE FINANCING FOR YOUR NEW SMALL BUSINESS: INNOVATIVE SOLUTIONS FROM THE EXPERTS WHO DO IT EVERY DAY—WITH CD-ROM This new book will provide you with a road map to securing the financing. The book goes into traditional financing methods and assists the reader in setting up proper financial statements and a proper business plan. It details the differences between debt and equity financing and how and why to use each. Valuation techniques are explained for determining what your business is truly worth. However, the book’s real strength is in explaining alternative and creative methods of financing, such as SBA financing, investor angels, IPOs, limited public offerings and venture capital. Essential resources for finding the detailed information you need are included throughout. Item # 9780910627559 $39.95 Shri
Acquiring Financing - Any suggestions from the members here about tips on how to get financing to start a business or additional financing for expansion etc? Shri
You can do this without financing your business with it - If you are leaving your present employment or have retirement funds from a previous employer, you can rollover those retirement funds without any penalites or taxes involved (into your own business) rather than leaving them in someone elses business. You do not have to finance your business with your retirement to do this. Here's how it works: Our resources form a C corporation for your new business, your C-corporation creates a new retirement plan. Funds from the existing retirement plan are rolled into your corporations new reitrement plan and your new retirement plan purchases stock of your corporation. The program is IRS approved! Contact me if you are interested. FYI- This program has also been helpful for people obtaining an SBA loan for their franchise or Acquisition, because they can obtain the loan down payment for the loan from the rolled retirement funds (without penalties or taxes) rather than financing the entire business themselves. Contact us!


Share this article with your friends. Fund someone's dream.

Leave a comment below or share on the left and you'll help support entrepreneurs in Africa through our partnership with Kiva. Over $50,000 raised and counting - Please keep sharing! Learn more.

Newsletter

Get advice & tips from famous business
owners, new articles by entrepreneur
experts, my latest website updates, &
special sneak peaks at what's to come!

Name:
Email:

Popular Articles

What Is The Foundation for Your Vision?

Angel Investors Where Are You?

Rumor Has It

Suggestions

Email us your ideas on how to make our
website more valuable! Thank you Sharon
from Toronto Salsa Lessons / Classes for
your suggestions to make the newsletter
look like the website and profile younger
entrepreneurs like Jennifer Lopez.