FAQ

Understanding SR&ED Finance.

Here are some of the most commonly asked questions about SR&ED advance funding. That said, if you’re unsure or want to have your questions answered by a human please contact us for a one-to-one conversation about your eligibility and needs.

Why is Fundsquire a smarter source of growth?

We don’t just issue SR&ED tax credit loans, we seek to understand your business, your technology, and your vision. Most of our clients have become long term partners because they trust Fundsquire, we trust our clients, and we can add significant value to their business.

 

What is Advance Funding of SR&ED tax credits?

SR&ED Advance Funding is a debt facility (a loan) against a future SR&ED refund. Fundsquire can advance up to 80% of a future SR&ED cash refund up to 9 months before the company could receive the funds from CRA.

 

What is a SR&ED tax credit and refund?

The SR&ED investment tax credit is an incentive program run by CRA that entitles companies to claim 35%+ of their eligible expenditure in the form of a tax reduction or a cash payout. This refund can only be claimed after the completion of the fiscal year in which it was incurred. This is where Fundsquire comes in.

 

What companies qualify for the SR&ED tax credit?

Checking to see if you qualify for a SR&ED tax credit is somewhere between an art and a science, but companies that have strong investments in complex technology or R&D qualify. The CRA’s page on SR&ED tax credits explains qualifying activities and spending a bit more in detail. Alternatively, we are happy to have a chat and assess your eligibility, or introduce you to SR&ED consultants in our network.

 

Why would I take out a loan when I can just wait for my refund?

This is a question of Return on Investment (ROI). Our most successful clients use Advance Funding to accelerate growth or capitalize on an opportunity. Founders who have started more than one company immediately understand the value in non-dilutive funding. Here’s two examples (we have many more):

A loan of $100,000 could be used to bring on two developers for a few months, accelerating your product dev, beating your competitors to market and boosting user numbers. You now have a solid case and real numbers to present to VC’s, all on an accelerated timeline. By spending a small amount on Advance Funding, you’ve increased the value of your company significantly.

A loan of $200,000 could be used to purchase vital inventory, which when sold to your waiting customer, will result in $500,000 of revenue. In that case, the small amount paid for the loan results in a big windfall for the company.

 

Why debt?

Debt gives you the opportunity to raise money without selling precious equity in your company. The general narrative on startup financing focuses on VC’s and selling equity to raise cash. The smart use of debt during or between those funding rounds can be critical in cash flow management, timing, and improving valuation.

What’s the application criteria for Fundsquire’s SR&ED tax credit loans?

We look at an application from two angles: the SR&ED tax credit itself and the company’s overall position.

  1. SR&ED tax credit: we work with third party consultants, accountants or a company’s internal team to assess the size and risk of the potential tax credit
  2. Company position: We take a closer look at past, present and future company financials. These, along with a discovery call or two, typically provide enough information for a Term Sheet. Once a Term Sheet is signed and Application Fee paid, we take a deep dive into the company.

 

How long does the application process take?

We commit to a 10 business day turnaround on applications, but this does depend on the complexity of the deal and how fast you can provide our required documents. Our record for time taken between the signing of a term sheet to money in the client’s account is 6 business days. 

 

Is there an application fee?

Yes, we charge a 1% (of total loan value) application fee that covers the costs of the due diligence and credit review. This fee is refunded if the loan is denied by Fundsquire.

 

Does my business need to be profitable?

No, we work with many pre-revenue and loss making companies. We understand how startups work and what your financials look like.

 

Can I repay early?

Yes, and there is no minimum term and no early repayment penalty.

 

How much can I borrow?

At the moment we can offer loans between $50,000 – $1,000,000 but higher loans are negotiable on a deal-by-deal basis as well.

 

What sectors do you lend to?

Any company eligible for a SR&ED tax credit can be eligible for SR&ED tax credit Advance Funding.

 

Do you take personal guarantees?

Generally, no. Only in very specific circumstances will be make that request.

 

Our business has a registered security (lien) already, does that exclude us from qualifying?

This is not a deal-breaker, but we will have get a SR&ED priority agreement signed by your other debtor.

I want to borrow – why should I choose Fundsquire?

  • We are the only global company that offers SR&ED financing
  • Our fee’s, interest and terms are highly competitive
  • Our process is fast, simple, and customer experience is our highest priority
  • We actively leverage our fantastic partner network to add significant value to your business in Canada, and Australia and the UK if desired
  • We deal with pre-revenue startups right through to businesses with millions in revenue. We understand your financing challenges, and want to help your company grow and succeed.

 

I’ve paid the first part of the facility fee – is it refundable? 

Our facility fee is refundable if: Fundsquire declines the loan for any reason.
Our facility fee is non refundable if: The client chooses not to go ahead because they changed their mind or chose another provider after going through due diligence with Fundsquire. The first half of the facility fee is charged for our time spent assessing and approving the loan.

 

When is the rest of the facility fee paid? 

The remaining facility fee is either paid at the initial drawdown that is planned at a specific date, and it is deducted from the drawdown amount. If no drawdown is planned, we can set a date within 30-60 days where we ask for the remainder to be paid. The benefit of having paid the facility fee is that the borrower has the peace of mind knowing they can access the funds anytime from approval until the tax return is repaid, usually within 2-5 days. So, if an invoice needs to be paid or a hire needs to be made, we can provide the funds in a few days.

 

How do I pay interest and repay the loan?

The interest and principal will be paid off when you receive the payout from CRA.

 

Where does the funding come from?

The funding is a mixture of Fundsquire’s own capital and funding from a broad participation network of individual and institutional investors.

 

Post-funding, what happens?

Once the Loan Agreement has been signed and payments have been made, the loan enters the Monitoring phase. This is a monthly check-in with a credit specialist who will ask for updates and revised documents. This will continue until the loan is paid back upon repayment by CRA.

 

What sets Fundsquire apart from the industry in terms of Credit Analysis?

We have a deep understanding of both the company level credit risk and the underlying asset. We can comprehend the technology, analyze the financials, know the funding landscape, and have insight into the CRA’s perspective on eligibility for the scheme. We develop strong relationships with our clients, actively try to add value, and aim to develop open and trusting relationships.

How much of the future claim can you lend? What is your Loan to Value (LTV) ratio?

We typically lend between 50-85% of the estimated value of the future claim, depending on our familiarity with the business, SR&ED consultant, and your particular funding needs.

 

What security do you take?

We take a General Security Interest, and a 1st ranking SR&ED priority when applicable.

 

Do I need to work with a SR&ED consultant?

No, provided that you can demonstrate a strong history of SR&ED claims, knowledge and expertise within the business.

 

Do I need to change my R&D Tax Credit advisor?

No, we can work with most SR&ED consultants, but the LTV might differ depending on our familiarity with the company.

 

What happens if the R&D Tax Credits claim is delayed?

We set a short stop date at the expected time of repayment, then a long stop date after 2 months, on average. Until the long stop date, the same interest is incurred. Extra interest (which is outlined in our loan agreement) will be applied on further delays. We try to work with our clients to set a reasonable payment schedule if these delays drag out for longer.

 

What happens if the SR&ED Tax Credits claim is not paid?

Companies we finance have very strong SR&ED claims and processes that are defendable at audit. That being said, the CRA could still reduce the claim size or audit and outright reject it.

In the case where the refund size is significantly reduced or the SR&ED is rejected by the CRA, we will work with our client to create a reasonable repayment schedule.

Have a question?

No business or path to success and growth is the same. If you have a question, are ready to apply or would like to learn more about Fundsquire, please contact us today.

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