How Much Will Sred Tax Credit Financing Cost You and why Sr&ed Funding Makes Sense

Does a sred tax credit financing make sense for your firm, and whats the cost of sr&Ed funding in Canada? Well, we'd like to show you some solid reasons to consider a sr&ed loan - we'll let you make that decision , our role is to inform – yours is to decide!

If you are filing sred tax credit claims in Canada you also have the option to finance those claims, when completed, or in some cases, in advance! More about that advance scenario later.

Not every Canadian business owner and financial manager knows they can finance a sred claim - we meet with clients all the time who are surprised their tax credit can actually be financed and monetized into real cash flow, immediately. Naturally we are even more surprised when we run into firms that don’t even know about the program , or , more astonishingly, consider it ' troublesome' to file for a non repayable tax credit . Are we missing something, or is that akin to saying ' no thanks' to some free money.

If you do an internet search on the term ' government grants and loans ' you will see that there are thousands of inquiries around that term. In our humble opinion the two best ' government ' related programs in Canadian business financing are the Scientific Research and Experimental Development program, aka SRED! The other program is the government guaranteed subsidized Loan program, commonly known as the BIL program. More about that one on another day.

Filing your sred claim with the assistance of a firm or accountant or industry specialist is a large part of maximizing your claim. They know the positioning and guidelines around a proper submission, and its all about that fine line of maximizing your claim but ensuring it meets all the criteria. In the last year or so the government has actually streamlined the whole process around submissions, and the jury is still out as to whether Canadian business owners filing for sred tax credits consider this a good or bad thing.

Anyway, sred tax credit financing is available if you have a claim. And we are not talking via the bank, which generally doesn’t consider this a finance vehicle, but rather independent finance firms and Canadian business financing advisors who specialize in sr&Ed funding.

Clients are always very focused on their questions - we can close our eyes and rhyme them off - ' how much does it cost' ' whats involved' and ' how much can I get '.

Claims are generally financed at 70% of the value and the balance is simply held back as a buffer. The whole process can be completed in a week or two with your firm’s co operation, sr&Ed funding is structured very uniquely. You receive funding and don’t make any payments on this financing; it’s a kind of bridge loan. The financing charges are in the 2% per month range - sometimes less, and sometimes more and you can use the funds for any general corporate purpose. With a good track record your claim can be financed during the year as you spend funds , so it is kind of an accrual scenario .

Does sr&Ed funding makes sense? It does it you can use the cash from your non repayable grant to grow your business, increase profits, continue the battle against the competition, and increase your firms cash flow and working capital. The opportunity cost of not doing anything with your claim might just be too great!

Speak to a trusted, credible and experienced Canadian business financing advisor around tax credit financing that might just make great sense for your firm.


Stan Prokop is the founder of 7 Park Avenue Financial . The firm specializes in business financing for Canadian companies     in the areas of working capital , asset based lending, SR & ED tax credit financing, equipment financing,  franchise financing and banking .


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