The Canada SRED Tax Credit. We’re reminded of Mark Twains great quote ‘ the reports of my death have been greatly exaggerated , as there isnt a day these days when we don’t hear of the SR&ED Research credit under attack , even its demise predicted .
And there is always one trouble maker in the crowd. Witness Jan 23 / 2013 – a large article in Canada’s national business newspaper – its headline said it all ‘ Too much support for small R&D ‘. They might as well have drop kicked Canadian innovators in the gut! , dont you think?
The premise of that article was that the current approximately 44% non repayable subsidy that close to thousands (yes thousands of firms, including your competitors) of Canadian businesses get when they submit a SRED credit application.
The author, a ‘ researcher” ( isn’t that like a consultant – ‘those that can’t teach consult..’ ) stated that smaller firms that file SR&ED claims might not be having that hard a time in raising capital as one thinks. The author further maintained, and we totally disagree that many firms such as yours pay premiums for financing your business solely because outside investors and lenders cant properly assess the quality of your R&D.
Again, incorrectly so in our opinion, the author maintained that small firms with track records can get ‘ favorable financing ‘. He must be dealing with different banks that we do on a daily basis, because clearly the SME sector in Canada is in fact challenged by growth financing. More so if you are a start up. 99.99% of the time we can safely assure our clients that the SRED tax credit is not directly financeable by the banks in Canada. And we stand by that assertion.
That same article maintained that the benefits of SRED credits are ‘ absorbed’ by owners and employees of the firm. We have no idea of what he meant by that.
We will let Canadian business owner and others decide the true questions, whether the SRED credit provide a net benefit to Canadian business. What we can say with assurance is that your SR&ED credit is still financeable.
It is true though the SRED credit applications submitted by SR&ED consultants that you hire to prepare these claims will probably decrease in size and value because of recent changes to the program – one major one being the elimination of the capital assets used in the R&D work.
When all is said and done though our key point today is still the same. Your Canada SRED TAX CREDIT PROGRAM claim can still be financed. In fact, here’s some great news, there have been many enhancements to the financing of SR&ED tax credits. Not only can you get a SRED Loan based on your filed claim, you are even eligible to borrow under next years claim .And in certain cases even a SRED credit line facility may be available to yourself .
SRED financing terms are still essentially the same these days. Claims are financed at 70% loan to value. No payments are made on the loan – so great cash inflow and even greater, no cash outflow !… and the remainder of the credit is advanced to your firm, less financing costs, when the claim is approved and paid by the government.
Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with financing your SRED (SR&ED) research tax credit when a SRED Loan makes sense.