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Financing Your SR &ED Tax Credit in Canada – Can you get a SR ED loan? Yes you can!

Guest post by: Stan Prokop

Article Overview: The article reviews the ability of Canadian business owners to generate cash flow and working capital via the financing of the Canadian S R E D tax credit filing .

Financing Your SR &ED Tax Credit in Canada – Can you get a SR ED loan? Yes you can!

Not everyone Canadian business owner or financial manager takes advantage of the Canadian Governments SR & ED (Scientific Research & Experimental Development) tax credit program. It's clearly in our opinion of the best and truly legitimate and valuable programs that a government provides for its business entrepreneurs in Canada .

Many, when they hear of the program for the first, are amazed that they can receive significant funds, that are non - repayable (yes that's non -repayable!) for their ongoing investment in research, product development, business processes, etc.

And, those that do take advantage of the program dutifully wait many months, in some cases a year or so or more for their cheques from the provincial and federal government.

Why not borrow against these funds and utilize those funds for much needed working capital and cash flow to further fuel the growth of your firm.

SR & ED financing is still relatively unknown in Canada - it is clearly a very specialized type of financing, somewhat 'boutique' let us say, in nature.

The government, via the program, wants to provide funds to Canadian business so they can continue to further their research and development and provide Canadian firms with a lead in technology and business.

So lets get back to the financing of the SR ED , aka ' SHRED ' , aka SR &ED. SR ED Loans are typically for approximately 70% of your combined federal and provincial claim. The claim can be financed as soon as you have formally filed the claim with the government, which is at the same time you do your year end tax filing.

SR ED applications can be filed for the last two years, so on occasion your firm might in fact have a significant receivable generated by virtue of that filing you have done. Our observation is that some companies actually book that receivable in their financial statements for the full amount of the claim. Some companies take the conservative approach and only record the cash coming in when it is received from the government.

So, you as a business owner or financial manager of a Canadian company are asking yourself the obviously - if I book the SR ED as an account receivable, will my bank provide financing for it. Our experience is generally 'no 'they will not. Canadian chartered banks, being somewhat more conservative in nature, recognize the SR ED claim may or may not be approved. So if there is any risk in your financial structure as viewed by the bank they will not advance funds.

The private sector of Canadian finance is in fact doing the SR ED financing. Claims are financed on the basis of your firms overall financial status, although we add that even pre revenue companies or companies that are losing money can still obtain SR ED financing .

Every Canadian firm that files a SR ED claim should consider financing the claim if they feel the additional cash flow and working capital will assist their company in continued growth and success. Talk to an expert and use this alternative financing as a great way to boost cash flow.

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Article Tags: canadian business, S R ED Financing Canada, S R ED loans, tax credit, working capital



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Re: Banks Vs. Credit Unions - [quote="Nana":103oec26][quote="Takuya":103oec26] Credit Unions (they hate to be called banks) are more conservative. Although they typically offer the best terms, they are more concerned about people's abilities to repay the loan. [/quote:103oec26] So it would be best to visit a credit union to try an obtain a loan before going to a bank? Or are credit unions looking for people who have a more matured business since they'll have a greater chance of paying off the loan?[/quote:103oec26] Its also very possible that one bank could provide the best checking and savings options while another bank could offer you the best lending options. Nothing says you can't deal with more than one bank or credit union. I've done this a number of times with different businesses and I've gotten the best options for me and the business and it also provides additional credit references. Shri


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