Canada’s Scientific Research and Experimental Development (SR&ED) Program provides an innovative source of cash that’s attractive to many businesses. Unfortunately, there are a number of misunderstandings about this type of financing that might stop some from taking advantage of it.
1. It’s unique
Using the government’s SR&ED refund or tax credit is a unique method of boosting your company’s cash flow and adding working capital to its budget.
2. It’s a tax credit
Unlike many other sources of capital, the SR&ED Program is a tax credit or refund that the government provides to you so it doesn’t have to be paid back.
3. Most businesses are eligible
There is a common misconception that you’re only eligible for the SR&ED Program if your business is involved in the sciences, tech or research industries. This is one of the reasons that many businesses don’t take advantage of this generous governmental program.
4. Most of the refund can be financed
In general, you can expect to be able to finance between 70 and 85 percent of your refund. Different factors, such as the eligibility of your claim with the Canadian Revenue Agency (CRA), if you’ve filed previously and the size of your claim, and your corporate risk profile, can affect the actual amount that you can finance.
5. SR&ED financing is flexible
You don’t have to funnel the money you receive from the SR&ED Program back into your company’s research and development (R&D) activities — though many businesses do.
6. An application is needed
Before you can access SR&ED financing, you’ll need to fill out the appropriate application. Because the application process can be challenging, this is often where businesses decide that it’s too much trouble to pursue. However, working with a lender like Easly makes this process more streamlined than other capital sources.
7. SR&ED consultants can help
An SR&ED consultant is a highly-specialized professional that not only stays updated on the current regulations but also has experience with writing the necessary reports that must be included with your SR&ED claim application.
8. Paying the consultant can vary
In some cases, the SR&ED consultant works on contingency and their fee is tied to the final approval of your claim. In others, a flat fee is charged. In both instances, in most cases, the fees can often be taken from the funds received.
9. SR&ED financing is quicker
The Canadian government can take months to process your SR&ED claim. Financing can be completed in as little as two weeks. In fact, it’s possible for your business to have access to its funds up to 15 months before you even file.
Contact Easly if you still have questions about SR&ED or financing your tax credits.