SR & ED Tax Credit Financing is somewhat misunderstood, or in fact not really Considered by many Canadian business owners and financial managers in Canada. We use the word ?Considered? simply because many are not aware SRED claimants that their claims can be SR & ED financing as soon as they are filed ? in some cases prior to filing
So let?s return to our! topic ? what are the two things you need to know about financing your SRED tax credit. We?ll keep it simple ?
first
You have to have a SR & ED claim to obtain financing for the claim
2 A financing SRED claim is in fact similar to any business financing application ? frankly it?s quite simple and more focused
Is that it? Yes, it?s as simple as that. SR & ED tax credit financing is one of the most unique ways to bring valuable cash flow and working capital back into your firm. . Just the very nature of SRED itself suggests that your firm Relies heavily on the credit to recover the capital you have spent under the government?s quite generous non repayable grant
So let?s return to our point # 1 ? to finance a claim, you need a claim. The SRED program in Canada is the rebate governments, in effect it?s a grant, back to Canadian business for any investment you make in research and development. More and more information is coming out everyday from government and private sources suggest that many firms Which who are eligible for the program either are not aware of it, or even more disappointing, do not know how to go about preparing and filing a claim . We are often amazed when some clients infer that it?s ?too much trouble? to prepare a SRED claim.
A couple of points
subject can be made on this. We have met a small handful, and we repeat small handful! Of clients over the years who prepare their own filings. This of course is possible, legal, and business owners in some minds? cost effective. The hard reality is that most firms do not have the technical and financial know-how to complete a claim on their own. (Apologies to the Which firms successfully prepare their own claims a file ? you know who you are!)
The Majority of SRED claims in the area are prepared by what is known as SRED consultants. We tell clients that these consultants are specialized high, are up to date on current government SRED and accounting matters, and in most cases work on contingency ? meaning that they prepare the claim at their own risk and time, and charge a fee Which is totally Based on success of the final claim approval. If Canadian business owners and financial managers do not choose to pay a contingency fee then they can play a flat rate based on the SRED consultant?s time on the claim and filing. Naturally more often than not the fee has to be paid SRED as soon as the claim is completed, even if you have to wait several quiet months to a year to get your funds. More importantly, as It Relates to the financing of the SRED claim, a claim Tends to be more viable when finance it is prepared by a reputable consultant in this area. And in fact when you claim is financed, either at time of filing or priority, the SRED consultant can then be paid in full or in part out of the financing. So the bottom line on our point # 1 is simply ? make yourself aware of the program if you are not, prepare a solid claim with the use of a reputable consultant, and be knowledgeable that the claim can be financed during preparation or at time of filing
. Let?s move on to point # 2 ? Clients ask, is it really that simple to finance a SR & ED tax credit. There is only one answer, Which is of course yes. You should treat your SRED tax credit financing just as any other basic financing. Because this area of ??Canadian business financing is somewhat of a boutique are you should Ensure you are working with a credible, trusted, and experienced advisor in this area.
Let?s cover some of the very simple basics around the key financing of your claim. Most firms are eligible, under the program itself, to receive anywhere from 20-50% of your expenses in the R & D area. Your SRED claim will ultimately have a final value, Which is made up of the federal and provincial portions combined. Let?s assume its 200,000.00 as an example. You and your accountant have filed your year end financials, and included a SRED claim of 200k. What happens now if you want to finance that claim. The reality is that you simply have to fill out a standard business financing application ? just as if you were borrowing for any other matter. In our case the ?collateral?, if we can call it that, it?s the SRED claim
Important to note hear that you are not incurring debt or creating a ?loan? on the SRED -. Your balance sheet stays intact, you are simply ?monetizing? the SRED claim in order to generate working capital and cash flow now. Generally you receive approximately 70% of the claim as an advance, with the 30% held back to yourself and payable in full when you final claim is audited, approved, and that from the government is Cheque ?in the mail?! The financing feels itself, associated with the tax credit financing are deducted from that final 30% holdback. You can create a generic rally SRED loan for a period of a minimum of 60 days, but most SRED financing generate load rally from 3-12 months, Depending on the size of your claim, its eligibility with CRA, and Whether you are a first time filer .
So what?s our bottom line ? it could not be simpler:
? Make yourself aware of this great program ? prepare a proper claim with someone who is experienced
- If you are focused on cash flow and working capital financing needs consider your claim and directly monetizing this great program
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Source: http://www.lovefinanceinfo.com/2012/03/sr-ed-tax-credit-financing-the-only-two-things-you-need-to-know-about-sr-ed-finance/?utm_source=rss&utm_medium=rss&utm_campaign=sr-ed-tax-credit-financing-the-only-two-things-you-need-to-know-about-sr-ed-finance
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