What If Your SR &ED Research Tax Credit Grant Could be Financed For Funding Today via a SRED Loan?

If your company is filing what is known as Scientific Research and Experimental Development Tax Credits, (SR & ED) your firm has expended significant funds on developing or improving products, processes, etc. Receiving that cheque from Ottawa is of course always a great thing, but why waits?

One of the smartest things you can do is to consider the financing of your claim – that can be done via a short term sred loan – we could almost call it a bridge financing loan for your sr&Ed claim. Why is that a good strategy? Well , one main reason might be that since the tax credit is in the form of a non repayable grant then receiving funding for it today , ( rather than several months or a year from now ) allow you to put that money back to work into your business . That valuable cash, which you have already spent, can be re directed to general working capital, further re investment in r&d, reduction of payables, investments in new equipment, well you get it, for an general worthwhile corporate purpose .

To finance your claim it only makes sense that, first of all, you are eligible, and that you have in fact filed the claim. Your claim is of course filed by yourself and your accountants at your fiscal year end, via policies developed by Canada Revenue. Each province might have a little different spin on the amount you can claim but the federal portion of the claim always stays the same.

When financing a SR and ED claim the lender pays careful attention to who prepared the claim for your firm. This is typically via what the industry calls a SRED consultant, who typically has expertise in one or a variety of industries, including such areas as computer science, technology, physics, chemistry, manufacturing, etc.

SR ED claims can be financed whether your claim is a first time claim, but the process often goes quicker and easier if you have filed successfully in the past. Our point is simply that you should not be deterred if in fact you are filing for the first time – however as a cautionary note you should note that more focus will probably be paid to the overall quality of the claim and who prepared it for your firm. You can actually claim for a 2 year period, i.e. your current year and the previous fiscal year.

Clearly most business owners and financial mangers who utilize the program recognize the tremendous benefit of increasing your overall return on R&D by filing a claim and recapturing your funds. And if you can utilize those funds sooner rather than later, why not consider financing, or in effect monetizing the claim.

Financing your SR and ED claim can of course assist in your overall cash flow and working capital position. Claims are generally financed at 70% of their filed value, that allows a 30% buffer in case adjustments are made to the claim , and , guess what, you make no payments on the sr ed loan . Funds you receive are netted out against the final cheque from Ottawa and your provincial jurisdiction when your claim is ultimately audited, approved, and funded.

Clients often ask how complex a sred loan is, and what the timing is to receive funds. With your full co operation funding can usually be done within a couple weeks of your application, and the reality is the sred funding is no different than any other business financing your might entertain. It’s that simply, you complete a standard business application, and at the same time provide details of your sr Ed claim which in effect is the collateral for the financing. You aren’t incurring debt, which is a relief to business owners; you are simply ‘monetizing ‘your asset, in the same manner as you would if you were financing a receivable .

Speak to a trusted, credible, and experienced advisor in sred loans, and determine the advantages of monetizing your sred claim into valuable cash flow and working capital. That’s solid use of one of Canada’s greatest programmes for industries of all type.


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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