As a startup founder in Canada’s vibrant innovation ecosystem, two concepts involving your business will undoubtedly be top of mind: cash burn rate and runway. Cash burn rate refers to the rate at which a company exhausts its cash reserves. Runway is the length of time before a startup—running at its current cash burn rate—will run out of money and need to source capital either through revenue generation or external sources.
The challenge to balance growth and cash burn is more pronounced if you’re at the helm of a pre-revenue startup. Extending your company’s runway can seem daunting, as seeking external capital is your only option.
SR&ED financing is an innovative solution for companies that claim SR&ED tax credits, as it directly addresses their cash flow management challenges. With this financing option, you can tap into your accrued refundable SR&ED tax credits up to 18 months sooner. Instead of waiting for the annual disbursement from the Canada Revenue Agency (CRA), your company can receive cash advances against your accrued refundable SR&ED tax credits, providing an immediate cash flow injection. As you accrue more credits, you can receive more advances.
With SR&ED financing, you can transform a single annual SR&ED refund into regular cash inflows to help smooth your cash flow throughout the year. This regular cash infusion can provide a measure of financial stability, add a buffer around your cash burn rate and extend your runway, giving your company more time and flexibility to reach its milestones, become cash flow positive and, ultimately, achieve long-term success.
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When considering SR&ED financing, you should understand what to look for to unlock its full potential. A good SR&ED financing provider should offer benefits that align with the needs of your business, whether you’re a startup or growth-stage company:
To get a clearer picture of the SR&ED tax credits your company might qualify for, consider using an SR&ED calculator, like the one developed by Easly, a leading SR&ED financing provider. The calculator includes different amounts of tax credits earned for different expenditures, as well as different provincial and territorial reimbursement rates and provides you an estimate of the capital you could access using SR&ED financing.
Ultimately, SR&ED financing is more than a source of capital—it’s a strategic tool you can employ to better manage cash flow and take control of your funding timeline. This often-overlooked financial strategy can unlock your company’s potential and fuel your journey to long-term sustainability and success.
Easly supports innovation across Canada by providing non-dilutive capital to companies that receive investment tax credit (ITC) refunds, such as those awarded through the Scientific Research & Experimental Development Program (SR&ED). We enable our customers to control the flow of capital, turning their annual lump-sum ITC refund from a distant receivable into cash in their bank account.