While it’s not uncommon for business owners, especially in the early stages of a startup, to fear accumulating debt, not all forms of debt are created equal. With the proper strategy and guidance in place, sourcing private capital and utilizing government initiatives like the Scientific Research and Experimental Development Program (SR&ED) can be a great way to get yourself ahead. Below, we’ll take a closer look at smart debt and define some of its benefits, as well as how to navigate seeking external funding. Read on to learn more!
When is Debt Beneficial?
Every business has unique needs and circumstances that will dictate different courses of action to stay on top of overhead and growth expenses. For businesses that conduct research and development (R&D), government initiatives like the SR&ED program provide crucial financial support. Savvy businesses leverage their accruing SR&ED tax credits with Capital-as-a-Service (CaaS) providers, like Easly, to advance their refunds and access capital throughout the year rather than in a lump-sum payment on the CRA;s timeline. This is an example of one of the aspects of smart debt.
Partnering with a skilled financial and/or legal advisor will give you the information you need before you take on any debt, allowing you to move forward confidently and make a long-term strategy that keeps you ahead of the game and eliminates confusion or the risk of over-extending your budget.
With the right plan in place, the benefits of smart debt include the following:
No Pressure on Revenues or External Capital Infusions to Service the Debt
With smart debt, you can avoid additional pressure on your revenue or external capital infusions, as SR&ED financing with Easly does not depend on revenues to service it. That means you can avoid debt servicing throughout the year and reap the benefits of cash flow positive financing as repayment comes directly from your SR&ED refund. This ‘self-resolving’ debt, combined with transparent terms and no monthly servicing costs, means your business can grow without restrictive capital.
Many companies face significant challenges in attaining capital as founders and owners must often dilute their equity to secure funds. Since Easly Advances are non-dilutive, your company doesn’t have to give up equity to receive the funds you need to continue your investment in research and development. This is especially beneficial for startups looking to build their company without interfering with profitability or their founders’ ownership stake.
No Personal Guarantee Required
Freeing yourself from being personally liable for your business’s debt allows you greater personal financial freedom and stability. Your personal assets are your own, not your business’s. So why put your personal assets on the line when your business requires financing? Fortunately, with smart debt, your personal assets are left out of the equation, as no personal guarantee is required. That’s why we call our Easly Advances founder-friendly.
Choosing the Right Financial Partner
As you venture into the financial lending world, you’ll find that there is no shortage of options to entertain. One of the most important factors you’ll want to focus on when looking at different options is equity-based funding vs non-dilutive funding methods like Easly’s CaaS financing. While there can be a strategic purpose behind exchanging some of your equity for capital, such as investing in a long-term mentorship with your financial partner, it’s also an approach that can leave business owners with less ownership than they may deserve. Equity-based investors maintain an element of control in your overall operations, even if their share is a “quiet” minority. Relinquishing equity means that you will be held accountable to your shareholders, and in time, this can cause strain as you continue to grow.
Non-dilutive funding methods such as CaaS prevent you from sacrificing equity and allow you to maintain full control of your operations while still giving you access to the funding you need.
CaaS Funding with Easly
Easly is proud to be a trusted source of financing for businesses that qualify for SR&ED, and other, investment tax credits. With over $120 million of capital deployed, we’re proud to partner with clients across Canada to ensure they have the funding needed when it matters most. Financing your refund with a Capital-as-a-Service (CaaS) firm, like Easly, is a reliable way to get the capital you need without giving up valuable equity. Our financing solutions are easy to apply for, with funding becoming available in as little as two weeks from application. With the help of our non-dilutive capital, you can focus on development and growth without the stress of approaching the end of your runway.
To learn more about the role of SR&ED refund financing in your company’s capital-raising efforts, contact Easly today!