Discover the common myths about SR&ED financing and how you fund your business' growth with ventureLAB Partner, Easly.
SR&ED financing is a specialized funding source for Canadian businesses, gaining popularity among startups and scaleups nationwide. It's a form of tax credit financing that provides accelerated cash flow backed by earned tax credits. Though its adoption as a strategic funding source is growing, there are still many companies that aren't familiar with the concept or have misconceptions about how it works. In this article, we will bust some common myths about SR&ED financing so you can make informed decisions about how you fund your business' growth.
Most Canadian companies conducting R&D work will be familiar with the SR&ED (Scientific Research and Experimental Development) tax credit program. The SR&ED tax credit program is the largest single source of government funding for companies conducting R&D in Canada, providing over $3B in tax credits annually to approximately 20,000 claimants. These businesses receive refundable or non-refundable tax credits that can be claimed with their annual tax filing.
Companies that successfully claim refundable SR&ED tax credits are awarded a reimbursement on a large portion of their eligible expenses. The program is offered federally, and most provinces and territories provide an additional tax credit on top of the federal portion (if you want to understand more about the regional differences, check out this blog post).
Successful claimants can receive SR&ED refunds ranging from tens of thousands to millions of dollars, depending on how much they spend. The program has fostered domestic innovation for decades and is a pillar of Canada's innovation strategy.
Pro tip: You can use an SR&ED calculator to get a good idea of the refund you can expect on your eligible expenditures.
Understanding SR&ED Financing
Before diving into SR&ED financing myths, let's outline what SR&ED financing entails. Different companies may offer different forms of SR&ED financing. For this article, we will focus on non-dilutive SR&ED financing, such as that offered by Easly, a leading SR&ED financing provider that, at the time of publishing, has deployed over $175 million in financing to hundreds of innovative Canadian companies.
Easly's approach is to provide financing on earned SR&ED credits to date at any point during a company's fiscal year. For example, a company can approach Easly at the end of Q1 and request an Easly Advance on the SR&ED credits they've earned to date. After a short application and underwriting process, a successful applicant will receive funds in their bank account within 48 hours. Then, at the end of Q2, the company can approach Easly again and request another Easly Advance on the additional SR&ED credits they earned in Q2, and so on. As you can see, this approach provides companies with a consistent flow of capital when it suits their needs rather than waiting for a lump-sum refund from the CRA.
If you'd like to know more about Easly's SR&ED financing, reach out to their experts here.
Now that you have an understanding of what SR&ED financing is let's start busting those myths!
Demystifying Common Misconceptions
The proof is in the pudding, as they say. The best way to bust a myth is to give a real-world example that contradicts it. We'll accompany each of these myths with a testimonial from one of Easly's customers that addresses the claim made by the myth.
Myth 1: SR&ED financing is a last resort
Myth 2: SR&ED financing involves a complicated process and long waits
Myth 3: Personal guarantees are required
Myth 4: My company won't qualify for SR&ED financing because we're too early stage or pre-revenue
Myth 5: The terms for SR&ED advances are burdensome
Leveraging SR&ED Financing for Growth
SR&ED financing is not just about surviving; it's about thriving. Businesses have utilized these funds to extend their runway, meet critical milestones, and even help facilitate mergers. Now that we've busted some of the common myths associated with SR&ED financing, you can make informed decisions on how to utilize it for your company best.
For those looking to explore SR&ED financing further, reach out to the experts at Easly, who can provide tailored advice to ensure that your business makes the most of your credits. Understanding and leveraging tools like SR&ED financing can be a game-changer for your business.
Turn your earned SR&ED credits from a distant receivable to cash in your bank account with Easly Advances. Easly's founder-friendly financing provides Canadian companies with non-dilutive working capital in a fast, flexible and streamlined way. No application fees, no monthly servicing, and no personal guarantees required. Connect with Easly's financing experts to learn more.
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