The great thing about SR&ED Financing (aka a SR&ED loan) is that it’s quick. You can get the cashflow you need to perform more R&D or to expand in a matter of days.
Service levels vary amongst SR&ED Financing companies. The best companies will be able to accurately qualify your request within 30 minutes and provide a term sheet within 24 hours. After you sign the term sheet, there is a period where the underwriters conduct due diligence. This can take anywhere from 3 to 30 days. In standard cases, due diligence should take about 1 week. Once the loan is approved by the credit committee, the funds are usually wired to your account within a day. Therefore, the best SR&ED finance companies will fund in about 10 days. The slower companies can take as long as 30 days from signing the term sheet.
It is important to know what timeline to expect while you wait for the financing company to underwrite the loan. Typically, the longer it takes, the more questions they will ask, the more of your time they will take up, and the less efficient the process. Finance companies with a secure portal and an efficient process will drain less of your time so you can focus on running your business.
One factor that often impacts the wait time to receive funds is whether or not the SR&ED financing company asks to see a priority agreement from an existing lender. If you have existing debt, and the lender has a General Security Agreement (GSA) on your company which covers all of your assets, the SR&ED financing company will want to receive a priority letter from the senior creditor allowing the SR&ED financing company to be the senior creditor for the SR&ED claim. Depending on who the senior lender is, this can take a significant amount of time. If the senior lender is a bank, allow for 5 to 10 days. A government organization can take up to a month. It’s important to take these varying time lags into account during your initial planning stages.
The final word of caution is that there is nothing more frustrating than selecting a SR&ED financing company, signing a term sheet, and going through due diligence just to be rejected 2 weeks later by the credit committee. You will have wasted valuable time and resources just to be back at the start line now with even more pressure on your cash flow. To mitigate this uncertainty, interview the SR&ED financing company. Ask them how many claims they have financed, what percent they reject at credit committee, and if your contact is actually on the credit committee. Having these questions answered in advance will offer you peace of mind that as long as your representations before signing the term sheet have been accurate, then your loan is likely to be approved.