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How to Finance a Canadian SRED (SR&ED) claim for Cash Flow

Guest post by: Stan Prokop

Article Overview: Information on how to obtain a SR ED loan in Canada based on your firms filing of your SR ED claim. How your firm can generate immediate cash flow from a SR&ED financing

How to Finance a Canadian SRED (SR&ED) claim for Cash Flow

Canadian business owners and financial managers who file SR ED ( aka SR&ED , aka SHRED ) claims in Canada are keenly aware that it is one of the true ‘ government grants ‘ that many people are referring to when they are researching the broad topic of government grants and loans .

Funds approved in your SR ED claim are non repayable, and we cannot think of a better program in Canada that both assists Canadian firms in ongoing research and development, as well as allowing Canadian to maintain momentum in new products, processes, and technologies .

Our is certainly not to questions why the government provides such non repayable grants, they simply do, and as a Canadian business owner you want to be able to maximize your claim.

SR ED credits are applied for every year when you file your tax return. Our focus is on ensuring the reader understands that this tax credit filing is the trigger that allows you to, if you choose, to also finance your claim. These claims are not traditionally financed by Canadian banks, as the banks we feel probably aren’t fully comfortable with the collateral. Most Canadian business owners also know that there is some risk involved in having your claim cut back a bit after it is reviewed by the appropriate department in Ottawa that hands SR ED claims.

If you wish to finance a Sr Ed claim it is important that you follow a much defined process. Let’s review that process and provide you with some additional tips and information on how the claim is financed and what benefits might come out of the cash flowing of your claim.

There exists in Canada a small boutique market in SR ED financing. Given the unique and specialized nature of this financing we strongly recommend that you work with a trusted, experienced and credible advisor in this area of Canadian financing. That will allow you to maximize the size of the financing we believe, but probably more importantly speed up the process.

When clients ask us how long it takes to finance a claim we generally advise on 2 to 3 weeks, assuming the full co operation of your firm in the usual back up to such a transaction with of course includes:

Application to Finance Sred

Related back up to the application – i.e. financial statements, etc

Copy of the SR ED (SR&ED) claim itself

Copies of prior year claims that were approved, if applicable

It’s basically as simple as that.

‘What amount of funds can we receive for our claim?’ That also is probably questions number two from clients – and the answer is that claims are generally financed at 70% loan to value, which means simply that for every $ 100,000.00 of claim you should expect to receive 70,000.00$.

SR ED financing is structured to your firm’s benefit – that is that they are loans that have no payment during the term of the loan. The term of the loan is of course as simply as long as Ottawa takes to process your claim. Various factors are involved in the timing – we can generally say it takes anywhere from two to twelve months to process your final refund cheque from Ottawa. At that time the other 30% of the claim is returned back to you by the SR ED financier, less the financing cost, or the ‘total time to carry the loan’

So in summary, you can of course wait from 3-12 months for your refund cheque for your sred claim, but why not consider putting that working capital and cash flow to work now. In reality all you are doing is collecting a receivable (the s red claim) faster than waiting for a long period of time. Put that money to work into more R&D to stay competitive in your industry, reduce your payables, or invest in additional marketing or machinery. Take advantage of SR ED financing to inject immediate cash flow into your company. Talk to a SR ED finance advisor today!

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Article Tags: cash flow, Finance Canadian SR ED, SR ED Loans, sred, SRED Financing



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