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A Working Capital Breakthrough – Financing Your SR ED tax credit claims ( SR&ED ) makes Sense!

Guest post by: Stan Prokop

Article Overview: How and Why to Finance research and development tax credits; Information for Canadian business on the financing of sr ed tax credit claims , why sr ed loans make sense, and how the monetizing of your research and development tax credit is achieved for positive working capital and cash flow purposes.

A Working Capital Breakthrough – Financing Your SR ED tax credit claims ( SR&ED ) makes Sense!

There is generally a limited number of ways to finance your company and generate working capital. Yet one of these ways is somewhat unknown to many Canadian firms who do any type of research and development under the SR ED tax credit program. And it is a pretty simple decision - finance your tax credit as soon as you have filed it!

Cash is flowing out of Canada's sr&Ed program - why not let it flow towards your company. Without a doubt this is the largest incentive for Canadian firms to fund research, because under the program you of course recover a significant portion of all you have spent, at the same time enhancing your firm’s competitiveness in its products and services.

So hopefully we have articulated to a certain degree the benefits of filing a sred claim... so how do we finance it. The answer is simply to contact a sred tax credit Canadian business financing advisor. The elements of a successful sred financing are quite simple: have your claim prepared by a sred consultant that has proper experience in your area or industry. As soon as the claim is prepared it is filed by your firm and your accountants, and you apply for a refund at the same time you file your financial statements.

Discussions with clients around sr ed , aka sr&ed research development tax credits focuses typically around two area, the actual benefits they attain from their r&d, and, as importantly the financial impact the sred cash has on their balance sheets and working capital .

So who is the sr&Ed candidate from a viewpoint of both maximizing the program, while at the same time benefiting from financing the claim? In a world, everyone, as long as you are filing. However if we had to profile the typical firm that both files and finances their sr&ed claim via a sred loan it would be a company that typically is in the technology industry and is in its early cycle of development, revenue, etc . But, that having been said many mature manufacturing or ' old economy ' type firms have been filing successfully for many years and reaping those same benefits.

So how does SRED translate into working capital in an innovative manner? It’s in the financing, or we can call it the ' monetizing ' of your claim. Think of it frankly as financing or monetizing any one of your receivables, in the same manner that you do with your bank or an independent finance firm. You are in effect ' discounting ' that receivable today to receive the benefits of cash flow and working capital now. Of your you can go to the mail box every day for the next 3-12 months and see if your sred cheque was ' in the mail ' , but why not one up your competition and finance your claim for that working capital breakthrough we are talking about it .

Think of the positive dynamics around that - you have accelerated R&D competitiveness, you have been re imbursed for those expenses under the sred program, and now you're taking that money that is non repayable - yes non repayable! And financing that claim to fund the on going growth and profits of your company.

Financing of the claim involves a very standard business application, with the focus of the sred as your collateral. You're not taking on extra debt remember, you are just monetizing your claim for cash flow.

The sred loan is a bridge type loan, and is liquidated against the final cheque from the government re your refund. In the meantime you have working capital to reduce payables, fund ongoing R&D again, or simply for any general corporate purpose. The whole process can usually be accomplished in a couple weeks. We're guessing it’s taken you that long sometimes to finance your new photocopier!

Speak to a trusted, credible and experienced business financing advisor on the benefits of cash flowing your sr&Ed claim for working capital now.

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Article Tags: research and development, sr ed, sr ed tax credit claims



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