What is SR&ED?

Looking for funding solutions to help support your research and development (R&D) activities and extend your runway? The Scientific Research and Development (SR&ED) program is the Government of Canada’s largest financial incentive offered to businesses conducting R&D. As a valuable way to extend runway without sacrificing equity, SR&ED allows businesses to maintain autonomy and control while pursuing innovation.

What is SR&ED?

The SR&ED program is an initiative administered by the Canada Revenue Agency (CRA) to encourage and reward businesses for conducting qualifying R&D activities. The program aims to promote domestic technological advancement, economic growth, and competitive advantages for Canadian businesses on the international stage. Businesses that qualify for SR&ED can earn tax credits to either reduce tax liability or receive a refund, depending on a few variables (learn more here).

Despite the generosity of the program, one specific challenge filers will need to be aware of is the fact that the SR&ED refund can only be claimed once a year, and it can take months to receive your funds after your claim is submitted.

Financing your tax credits is one of the best ways to avoid the pain that comes with delays in accessing funds. 

Eligibility

In order to qualify for the SR&ED program, projects must meet specific criteria as mandated by the government. The criteria include:

Technological Advancement: The R&D activities undertaken by the business must seek to achieve technological advancements, either in products, processes, or services.

Scientific Uncertainty: Businesses must explore scientific or technological uncertainties that they actively address through systematic investigation or experimentation.

Systematic Approach: The claimant should prove that they followed a systematic approach involving the formulation of hypotheses, experimentation, analysis of results, and iterative processes to attempt to achieve desired outcomes. It’s important to note that the projects do not need to be successful in order to qualify for SR&ED.

Documentation: Businesses filing SR&ED claims must maintain meticulous documentation that outlines the nature of the scientific uncertainties, the approaches taken, and the results obtained during the R&D activities.

Self-file or Not?

While you certainly can file your own SR&ED claim, it’s worth noting that skilled consultants are able to offer considerable assistance in optimizing your claim. They can also be instrumental when it comes to dealing with complex claims where the filer is participating in multiple government funding programs like SR&ED, IRAP and IDMTC. Whether you file independently or with the help of a consultant, your claim should clearly articulate the technological advancements sought, the scientific uncertainties faced, and the systematic approaches taken to address them.

Financing your Accrued SR&ED Tax Credits

As we mentioned above, SR&ED can only be claimed once a year, leaving companies with a large gap between when they first begin spending on SR&ED-eligible work and when they’re reimbursed for it. While this may be fine for certain businesses with heavily diversified funding portfolios or a highly stabilized funding cycle, oftentimes, your R&D efforts demand cash now.

Easly is an active supporter of Canadian-grown R&D initiatives and makes it easy for companies to use future investment tax credit refunds to secure funding throughout the year. To date, we have provided over $185 million of Easly Advances to Canadian companies.

Easly knows you need a partner you can trust when sourcing capital. When you partner with us, you gain access to founder-friendly capital with an approachable application and approval process designed to help you get what you need when it matters most.

Learn more about leveraging your SR&ED tax credits with Easly by contacting our team today!