SR ED funds filed by Canadian companies are often a key part of your company’s cash flow planning. Naturally your firm can choose to wait from anywhere up to 6 to 18 months for your funds from the government – however many firms wish to take advantage of that valuable cash flow and working capital for re-investment back into the business.
In almost all cases in Canada the Canadian chartered banks do not directly finance these claims, aka SCIENTIFIC RESEARCH AND EXPERIMENTAL DEVELOPMENT grants for several reasons, one of which is of course the ultimate uncertainty that your claim will not be full accepted when it is processed and adjudicated.
If you have filed a first time claim for your grant we can safely assume close to 12 months for your first time claim to be funded. Yes of course it’s a long wait, but Canadian business owners also appreciate that it’s a 100% non re-payable cash grant.
When we sit down with customers and discuss their general working capital needs and specifically the tax credit claim they often ask us if they can get their funds during the year, as opposed to waiting all year, expending funds on their research, filing the claim and then waiting for the cash. In certain cases, particularly if you have filed claims in previous years and have a good track record of SR ED success interim advances can also be made.
Your SR ED Financing is a very defined process, with the participants being your privately owned Canadian firm as the applicant, your claim preparer or consultant, CRA itself, and of course the finance firm as the final piece of the puzzle.
We meet with many firms that actually have qualified for SR ED cash grants for years and have not taken advantage of these funds. Unbelievably some business owners tell us they viewed the process as too time consuming, therefore they simply did not apply for the funds. In today’s business environment with a total focus on cash flow, working capital, and global competitiveness we feel you can’t afford to not take advantage of both the SR ED funds, as well as financing of your claim.
The basics are very simple – establish that you qualify for SR ED cash refunds, work with your accountant or an independent consult to set up a process and prepare claims on an annual basis, and, finally, unlock the cash flow in those SR ED claims if you wish to finance the claim.
Canadian business owners or their financial managers often ask as a first question in our meetings – ‘How much cash and working capital can I get for my SR ED financing. The answers is that as a general rule 70% of the claim funds are financed. So the simple arithmetic is of course that if you have filed a 350,000.00 SR ED claims the financing available on that claim is 245,000.00. We cant over emphasize that by receiving those funds immediately on filing your claim that that cash flow can be poured back into your business for general working capital purposes, more research, quite frankly anything you choose, up to even the Staff annual Xmas party!
Key steps to success in SR ED financing are simply:
Ensuring you qualify
Preparing a clean claim with documentation ( with your accountant or consultant) We further note that many consultants with prepare your claim on a contingency basis, therefore ensuring you have zero out of pocket expenses in claim preparation.
Filing the Claim
Working with an experienced, credible and trusted SR ED financing advisor to ensure you maximize the cash flow related to the claim financing.
In our experience the financing portion of the process typically takes up to 2-3 weeks. Is that a long time? Well of course the alternative is to get your aforementioned 245,000$ now or wait one year for the government to send you the cheque. Hopefully we have made our point!