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Sr Ed Financing - Canada's Immediate working capital and cash flow solution

Guest post by: Stan Prokop

Article Overview: The article highlights Canadian SR ED Tax credit financing as a solid alternative working capital and cash flow strategy for interim financing of Sr ed Claims, including a process overview .

Sr Ed Financing - Canada's Immediate working capital and cash flow solution

Sr Ed Financing is an immediate financing strategy to convert your filed Canadian SR ED claim into working capital and cash flow for your business.

If your company needs additional cash flow the SR ED financing strategy is a great source of financing and working capital of an ' alternative' nature. Naturally Canadian business owners and financial managers can wait up to 18 months (sometimes longer?) for your non repayable SR ED refund, but if you need the capital you can access those funds now.

SR ED financing is absolutely a boutique, somewhat unknown type of financing in Canada. We recommend that you work with a trusted SR ED advisor who can both maximize your claim (usually 70% of the total value of your claim) and assist you in ensuring the claim can be financed in a relatively short period of time. In claims for our customers that process usually takes 2-3 weeks with your full co operation of course.

Almost everyone agrees that the SR ED grant, which, as noted, is non - repayable! is one of the best government assistance programs in Canada . In our firms opinion both the SR ED grant and the Canadian governments CSBF loan program are the two most clear and viable financing assistance strategies for Canadian businesses.

When we meet with customers to discuss their cash flow and working capital challenges customers always ask us what SR ED financing funds can be used for - the simple answer is any general corporate purpose. We also point out that your claim, in order to be financed, must demonstrate that you have no CRA (the old 'Revenue Canada ') arrears for any government super priorities such as source deductions, GST arrears, etc. We would point out thought that although your claim might not be able to be financed with those arrears in place that you still should file your claim for funding as the claim will reduce or eliminate your arrears, depending on how much is owing to CRA and the value of your filing.

In certain cases we work with customers to pay any of those government arrears out of the financing of the claim - that's a good thing!

Business that finance SR ED claims clearly understand the value of the program - it gets your firm a significant refund in any research your firm does in products, processes, software, etc .

It is our understanding that over the last couple years the government has sent out cheques for 1.6 Billion dollars in funds for SR ED claims, so:

1. Why wouldn't your firm consider filing a claim for your funding?

2. Why wouldn't you consider a SR ED financing strategy for immediate funding of that claim?!

When we meet with customers and ask them what they will use the proceeds of the SR ED financing for they indicate that it will be for very basic working capital requirements - suppliers, payroll, further investment into their R&D processes, purchases of equipment, etc.

SR ED financing is typically in the 70% LTV range, by l t v we mean of course loan to value. That simply means that for every 100.00 of Sr Ed calim you can immediately access, on approval, 70.00 of your total claim. The balance is remitted to our firm once Ottawa and Ontario approve their respective parts of the claim. Naturally there are the financing costs which are typically taken out of that last 30% that is due your firm.

There is no real maximum on the amount of SR ED claim that you can finance, in our own experience claims are generally under one million dollars, but that is not a hard and fast rule.

We referenced working with a good Sr Ed financing advisor who can both maximize your cash out of the claim financing, and steer you through the process as well. In certain instances your bank might have a general security agreement on the claim, (even though they are not financing it?!) so a release is required from the bank, which is generally easy to obtain once we explain what we are trying to achieve.

Many firms ask us what the general criteria are for Sr Ed financing approval. It is essentially a standard business application process; however we clearly note that the emphasis is on the amount and quality of your claim, with significantly less reliance on your balance sheet and income statement. That is because the Sr Ed financing is secured by your actual Sr Ed filing - it's as simple as that.

Naturally it helps if your overall business outlook is generally positive, or if you are on track to recovering from any setbacks such as a financial loss, or balance sheet issue, etc

Cash flow and working capital needs? Filing SR ED's? Then consider your Sr Ed financing options!

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Article Tags: SR ED Cash flow, Sr Ed financing



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