You might be surprised to hear that your R&D claim means you may be able to access R&D advance funding: to borrow up to 80% of the value of your future R&D tax credit, up to 12 months before receiving payment from HMRC.
In the current economic climate, with post-pandemic inflation, increasing interest rates, and the war in Ukraine, an advance on your R&D claim can be the lifeline your business needs to keep moving forward.
And it’s not just economic factors you’re competing with; HMRC recently announced a slowdown in claims payout, with standard processing times rising from 28 days to 40 working days.
What is R&D advance funding?
R&D advance funding is a short-term loan on your future R&D tax credit. The advance can be against a future claim before you start the claim process, or it can be a loan at the point your claim is submitted (effectively skipping the wait time at HMRC). With advance funding, you can receive funds up to 9 months before your year-end.
Advantages of R&D advance funding
Reach your business objectives
Unlocking working capital with an advance reduces the strain on cash flow and enables you to plan and think strategically about investment decisions throughout the year. You can hire the right people at the right time, reinvest back into R&D efforts or even get your new product to market before the competition. It gives you that extended cash runway to grow quickly, avoid bottlenecks caused by outside factors, and reach your business objectives.
Keep hold of equity
Many small businesses are wary of debt financing, preferring to sell equity to raise money. However, taking advantage of debt like advance funding might be your best option in today’s climate.
It’s not an easy task to raise money from angel investors or VCs. And the current financial environment has made it more challenging, with investors’ confidence beginning to wane and them deciding to focus on their existing portfolio.
Debt financing, like an advance on your R&D tax credits, lets you keep hold of your stakes without having to sell shares. You don’t have to wait for equity rounds or experience the unfavourably high costs of early equity sales. And you can access money quickly and throughout the fiscal year.
Pay a pre-agreed, fixed cost
Advance funding was created to help innovative businesses. Typically, you know what you’ll be paying upfront, you don’t have to pay monthly, and no resources leave the company—this allows you to plan and reinvest funds into your business’ growth.
The quickest and best way to access an advance is through your R&D Tax Credit advisor; a specialist will have long-standing relationships. Most of their lending partners will be transparent, provide competitive interest rates and only require a one-off bullet payment at the end of the loan when you’ve received money from HMRC.
At EmpowerRD, we have robust process in place. Our online platform allows lending partners to access your claim information immediately, and our high success rate gives them the confidence they need to release the cash quickly. In fact, our fastest claimant completed their claim and received their funds in 6 days and 2 hours.