Managing cash flow is a daily challenge for a growing business. Funds need to be available on a schedule that sustains your trajectory.
All sources of capital have their advantages and disadvantages, and it’s prudent to consider each one carefully. Direct costs, like interest rates, are an obvious consideration, but there are other costs that must be evaluated.
Many sources of capital have a lengthy acquisition process that requires significant time and effort from senior management to secure. The opportunity cost of occupying management’s time cannot be overlooked, nor can the delay in receiving funds. In contrast, financing SR&ED can be a streamlined process if you choose the right partner. If your business claims SR&ED tax credits, you may be able to use on-demand SR&ED financing (aka capital on demand) to obtain the capital you need to secure your growth. Funds can be available in as little as two weeks after applying. In some scenarios, interest only accrues on withdrawals, enabling optimized cash flows, while reducing the cost of borrowing. The advances are secured by SR&ED credits which don’t require priority over any other assets, making SR&ED financing an attractive funding option for your other creditors.
SR&ED financing may be the means to strike the appropriate cost benefit balance for your capital mix
What is capital on demand?
Many companies meet the criteria to receive Refundable SR&ED Tax Credits both federally and provincially. As such, when these companies incur eligible expenditures on SR&ED projects, they are essentially accruing refundable tax credits. Those credits accumulate throughout the year, but are not received until after the SR&ED claim is filed with their tax return and the Canada Revenue Agency’s process of the claim is complete. SR&ED financing essentially expedites that refund, giving claimants on-demand access to funding throughout the year. This allows claimants to manage the timing of their refund, delinking it from the CRA’s administrative processes and timing.