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Identifying trusted funding sources is essential for companies engaged in research and development (R&D). With venture capital (VC) funding slowing down, non-dilutive funding sources like SR&ED financing have become increasingly popular and are poised to grow even more so this calendar year.
The Scientific Research and Experimental Development (SR&ED) Program is the Canadian government’s largest source of R&D-focused financial support and provides eligible businesses with valuable working capital that allows them to pursue the exploration of scientific and technological uncertainties without burdensome financial strain. Below, we’ll provide a quick review of the SR&ED program and discuss the benefits of financing your earned SR&ED credits with Easly Advances. Read on to learn more!
The Scientific Research and Experimental Development Program in Review: What is SR&ED?
The Scientific Research and Experimental Development (SR&ED) program was introduced by the Government of Canada to help fuel domestic innovation by providing financial support to remove some of the strain caused by the costs associated with R&D. The program provides more than $3 billion in tax credits to over 20,000 claimants annually.
What Qualifies
While the SR&ED program is quite wide-reaching regarding what sectors and activities are eligible, it is important to review qualification criteria before filing. The main objective of the SR&ED program is to support R&D efforts, which is an achievable goal across a wide range of sectors that aim to address technological uncertainties. Eligible industries include (to name a few):
- Agriculture
- Information and Communication Technology
- Life Sciences and Healthcare
- Advanced Manufacturing
For those with activities that qualify for the SR&ED program, there is a long list of eligible expenditures, including:
- Salaries and Contractors
- Materials consumed
- Overhead
What Doesn’t Qualify?
It’s crucial to remember that while SR&ED’s scope of acceptable activities is quite broad, there are several expenditures that do not qualify. To be eligible, your project must fit into one of the following categories:
Basic research: work undertaken to advance scientific knowledge but without a specific application in view.
Applied research: research or development designed to increase industry knowledge with a specific practical application in view.
Experimental development: R&D designed to create new or improve existing materials, devices, products or processes.
Even if your project qualifies for SR&ED, not all expenditures associated with it can be claimed.
Non-qualifying expenditures include:
- Standard R&D costs like testing other products
- Sales and marketing
- Typical business administrative costs
- Standard operations costs for buildings, equipment, or business licenses, and more
In essence, qualifying expenditures will be tied directly to your R&D efforts and must be considered essential to pursuing the goal of your project, as opposed to a normative cost that would be regularly associated with operating any business.
SR&ED Advances with Easly
The SR&ED Program is an extremely valuable resource for Canadian businesses pursuing R&D, but like any source of capital, it is not without its challenges. The program only disburses capital once per year after you’ve submitted a claim. Furthermore, after the claim is submitted, it can take months to receive your refund from the CRA. These factors create a long gap between expenditure and reimbursement.
One of the best ways to overcome the challenges caused by this waiting period is to partner with the team at Easly to finance your earned SR&ED credits and receive an advance that allows you to maintain your momentum. With over $185 million in capital deployed Canada-wide, Easly has the funds you need to keep your R&D initiatives rolling with minimal delays.
Learn more about the role of SR&ED advances in your company’s capital-raising efforts by contacting Easly today!
