Financing Sr Ed Credits In Canada The Sred Tax Credit Loan The Case Against Waiting

Financing SR ED tax credits is the final ‘ connecting dot in your firms journey in Canadas SR&ED r&d refund program. We’re examining the SRED Tax Credit Loan; it makes a strong case against waiting for your refund. Let’s dig in.

One of the characteristics of the SRED program is that despite providing billions in funding for thousands of firms in Canada the amounts range from claims from 50k up to 1 Million $ +. For firms like yours that invest in R&D that investment can be a significant portion of your costs.

While R&D is to a certain point discretionary the reality is that todays competitive environment forces you maintain the maximum investment you can. SR&ED financing certainly assists you to plough back your maximum given that waiting for your refund is eliminated – cash flow is accelerated under the loan.

While the real objective of the program is to reimburse you for your R&D capital costs it seems logical that many firms wouldnt take advantage of the program if they couldnt recapture a large part of their cash flow investment. The main resource that many firms rely on are the ‘ SR&ED Consultants that assist firms in preparing their claims and working with your accountants to properly file the claim.

That claim eligibility is a key part of the SRED tax credit loan process as a quality claim prepared by an experienced consultant helps speed up the financing process. That ‘ process’ by the way is typically the most common question we get from clients on financing SR ED credits – i.e. how long does it take to get a SR&ED bridge loan and whats involved.

The good news? Claims can be financed in a matter of weeks, in certain cases even less time. And the actual application? Just as easy – typical requirements are a copy of your SR&ED filing, your financial statement and tax return and some miscellaneous info typical for any business loan – i.e. your articles of incorporation info, etc.

Timing is everything is an oft used clich in business. The good news around financing SR&ED credits is that last years claim is financeable, as is this years, and yes, next years also can be started along! Your ability to document claims properly just moves everything along. SR&ED bridge loans are financed at 70% of the value of your claim – in simple arithmetic: every 1000.00$ of claim nets you 700.00$ in immediate financing.

Very few business people dispute the value of R&D and the tremendous benefits attached to the SR&ED program – it’s equally a good thing to fund your claims and accelerate cash flow. Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can help you ‘ connect the dots ‘ in your refundable tax credit cash strategy.

Stan Prokop

Business Financing Top Benefits Of Mezzanine Cash Flow Loans

Business financing in Canada offers some alternate solutions not often considered by owners/mgrs. One of these is ‘ mezzanine’ cash flow loans. We’re covering the basics, an a to z approach, so let’s dig in.

The one main requisite of unsecured cash flow finance, i.e. ‘ mezz is positive cash flow. That cash flow, when structured properly, allows business owners/mgrs to consider growth options normally not achievable, as well as potential acquisitions of competitors. Often it’s the key financing building block in a management buyout also.

The reason this method of business financing in Canada works so well? Essentially it’s because it reduces the amount of owner equity or outside debt that is required to make your chosen strategy work. Given that ownership equity (or giving it up) is expensive the owners/mgrs strive to create a finance structure that gives them the most financing at the lowest cost. That ‘ blended ‘ cost of all their financing reduces overall interest rates.

Mezzanine cash flow finance is often considered as an alternative to a traditional banking structure. One way of looking at it is that it’s a way to fund future growth that otherwise might not be funded until some future point in time when all those required bank ratios can be achieved. What business owner does not want to accelerate growth!

The key concept around ‘ mezz ‘ is that it’s essentially unsecured lending; providing only a promise to pay by the owner with the normal secured required.

Why does the traditional banking solution not work when owners think they have the right mix of assets for a traditional bank type solution? The answer is that those assets are often ‘ discounted ‘ by the lender – receivables are not financed on a 100% basis, appraisals might not back up the book values, and in many cases firms these days have some significant intangible assets on their books, which are typically not financeable.

As we’ve stated business financing through mezzanine cash flow loans gives your firm a solid chance to grow – more quickly. These loans, when structured properly are matched to your actual cash flow repayment ability. An interesting point in the whole issue of ‘ mezz’ financing is that the senior secured lender, typically ‘ the bank’ will often view your mezzanine loan as in effect…equity.

These unsecured cash flow loans typically cost more , with higher rates often approaching the teens, but again as we’ve stated its cheaper than giving up or raising more ownership capital.

If mezzanine cash flow financing might meet your needs for growth, acquisition, or recapitalizing seek out a speak to a trusted, credible and experienced Canadian business financing advisor who can help you achieve the benefits of such financing.

Stan Prokop