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Financing SR ED - Canadian Working Capital Solutions

Guest post by: Stan Prokop

Article Overview: SRED Financing, also called 'SR&ED' Financing, is a great working capital financing solution for Canadian companies seeking additional cash flow financing.

Financing SR ED - Canadian Working Capital Solutions

Financing SR ED - Not every Canadian business owner and financial manager who takes advantage of the Canadian SR & ED (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 SR ED 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, SRED 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 SR ED 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 SR ED 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 SR ED financing 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 SR ED claim. In general the amount is 70% - By that we mean that if your SR ED 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 .

Timing they say is everything in business, and the only negative aspect of getting your firms SR ED cash after filing your claim is waiting for the government to review the claim and send you a cheque. That's the benefit of SR ED financing.

In summary , if you are a Canadian private company , and have filed a SR ED claim, and you wish to finance that claim work with a reputable financing advisor who is experienced in this area . This will maximize your SR ED financing and ensure additional working capital flows back into your firm. It's a great financial strategy!

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Article Tags: cash flow financing, Financing SR ED, SRED Financing, SRED Financing



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