Wondering how you can make the most of your SR&ED loan and maximize your return? As a valuable source of funding for R&D projects across British Columbia and Ontario and development hotspots throughout Canada like Calgary, Montreal and Halifax, SR&ED tax incentives can help carry your business through vital stages of growth. Knowing how to increase your government funding, as well as leverage your financing opportunities, is vital to enhancing your overall capital stack and creating a sustainable runway as you continue to drive forward with innovation.
At Venbridge, we know that finding the right loan partner, as well as the best loan to value (LTV), can be stressful for companies. To help eliminate confusion and simplify the application process, below, we’ll take a closer look at some of the key factors that influence the size of your SR&ED loan and how you can put yourself in the best position for success. Read on to learn more!
What Influences Your SR&ED Loan?
Generally speaking, there are two main factors that inform the size of your SR&ED loan: how much your refundable SR&ED tax credit is and the loan-to-value ratio of your prospective lender. The majority of lenders, including Venbridge, will offer financing options depending on your accrued SR&ED credits. In the simplest of terms: The more SR&ED-eligible activities your R&D engages in, the greater your SR&ED claim and subsequent loan threshold will be.
Some of the best ways to increase your funding potential are:
Balance Your Earnings
R&D-based businesses will likely already be familiar with the premise that much of your funding potential is tied to risk assessment and analysis conducted by prospective partners. Expenses can fluctuate heavily during the early stages of R&D, and unexpected setbacks can leave you needing fast access to additional capital.
While the SR&ED program offers substantial support to businesses conducting innovative research, the downside to this form of government tax credit is that it can take weeks or even months for your funds to arrive. In the interim, most startups and businesses need to find another way to cover overhead and core expenses like payroll and the cost of materials without eating too far into their reserve funds. Focusing on steady revenue helps to reassure lenders that you are a viable risk and financially responsible. This, in turn, allows lenders to increase the loan-to-value of your SR&ED credit to your benefit.
Show Your (Healthy) Risk Profile
Equity, liabilities and total assets make up your corporate balance sheet, which is integral for increasing your odds of getting better funding in the long term. Having vested prior and existing partners lowers your risk profiler in the eyes of lenders by speaking to the fact that others have already put their faith in you. The less chance there is of your equity and future viability being questioned, the stronger your loan-to-value potential. Adding to your total assets and decreasing your dangerous liability are additional ways to make your profile stand out.
Borrow Strategically
Borrowing quarterly can help maximize your credit facility and allow you to fund your R&D while actively managing your active cash flow. Partnering with a vetted firm like Venbridge builds a strong financial portfolio to put in front of current and future investors. Knowing how to leverage your assets from government grants to programs like SR&ED and external capital from venture partnerships is essential to making your funding go further and setting your team up for success as you continue to pursue innovation.
Venture Funding You Can Trust with Venbridge
At Venbridge, we know that having access to liquid capital is imperative for R&D-based businesses across Canada. Whether you’re facing stiff market competition in Vancouver, Calgary, Halifax or other locations throughout the country, we are here to ensure you don’t have to deal with the headaches of waiting for SR&ED refunds to arrive. With an extensive portfolio of previous R&D success stories under our belt, Venbridge has provided hundreds of SR&ED funding solutions for businesses across Canada.
We extend our financing options for applicants with a minimum of $130k on their SRED claim and one year of filing history. We offer access to capital in as little as two business days upon approval from our underwriting team.
