R&D Tax Credit advance funding
R&D advance funding can give you access to up to 80% of your future R&D tax credits up to 9 months before receiving the payment from HMRC.
The R&D tax credit scheme is a lucrative government tax incentive, which can credit your business up to 33% of your R&D costs. However, there is a long waiting time between the initial moment you build your claim and the day you receive your tax relief from HMRC. Debt financing like R&D Advance Funding reduces this waiting time and gives you quick access to the funds you need.
R&D advance funding can prove helpful for many businesses. By getting your future R&D tax credits months in advance, you can unlock working capital and reduce the strain on cash flow. Thus, allowing you to plan and reinvest back into your business at crucial times in the year, helping you meet your objectives and avoid any bottlenecks or barriers.
What is R&D advance funding?
To speed up the receipt of funds, you can take out a short-term loan on your future R&D tax credits. This is widely known as “R&D Advance Funding”. The advance can be against a future tax credit claim before you start the claiming process, or it can be a loan at the point the claim is submitted (effectively skipping the wait time at HMRC).
This type of debt financing is an excellent option for most businesses as it enables you to receive funds up to 6 months before your year-end, which is when you are required to file your R&D claim. Since it can take HMRC up to 3 months to release your tax credit payments after a claim is submitted, you could, in theory, have your future R&D tax credit up to 9 months in advance.
Once you have received your HMRC credits, you will be required to pay back the loan from the proceeds of your relief.
R&D advance funding with your R&D tax credit advisor
Not every R&D tax credit advisor offers advance funding in addition to their R&D tax credit claim service. Therefore, it’s a good idea to check with your provider to see if they offer this additional service before you go ahead and claim.
While you can apply for R&D advanced funding through external providers who just provide loans, securing your future loan through the advisor who’s managed your claim is the quickest and most advantageous option.
Why is it quickest through an R&D tax credit advisor?
The due diligence process is quicker and more efficient as the advisor has all the relevant information from your claim document. Your R&D advisor would typically have developed a good relationship with their loan provider and a speedy process for passing on information about the claim.
At EmpowerRD, we have an excellent relationship with our third-party lenders and can offer exclusive preferential rates. Since our inception, we’ve had a 100% success rate with R&D claims and no enquiries from HMRC. This unique track record has allowed us to establish a good level of trust with our partners. When we go to one of our loan providers with a claim, they know it has been through the proper due diligence process.
It’s not just the strong relationship we have with our partners that speeds up the receipt of your funds, but also our online claiming platform. Our loan partners have instant access to a business’ tax credit claims history through our online platform. Thus providing them with exactly what they need to advance up to 80% against your expected credit.
In fact, our fastest claimant completed their claim and received their tax credit loan in 6 days and 2 hours, and most of our claimants submitted a claim in under a week. If you’d like to know more about why our claiming process is so fast, visit EmpowerRD for more information.
1. We review your specific needs
We look at your business’s case and provide you with the best lender for your circumstance. Factoring in your claim size and specific needs.
2. Due diligence process from a lending partner
The lending partner will have their team assess the loan application, which is usually a quick and seamless process due to our strong partner relationships and our transparent online platform.
3. Loan offer
You will receive your loan offer, choosing to accept or decline.
4. Receive loan
The money will go into your bank account. Once HMRC has paid your R&D tax relief, you use the payment to pay back the loan.
The Benefits of R&D advance funding
With advance funding, you can get your future R&D tax credits months in advance. This cash injection allows you to reinvest funds back into your business at speed and at crucial times.
With an advance, you can think strategically about how you invest. By unlocking working capital and reducing the strain on cash flow, you can hire the right people, reinvest back into R&D efforts or even get your new product to market before the competition. It gives you an extended cash runway, allowing you to move quickly, avoid bottlenecks, and reach your business objectives.
There are also providers out there that can organise a quarterly cycle or give higher funding access to help with cash flow.
Keep hold of equity
Many small to medium-sized businesses are cautious of debt funding, preferring to sell equity to acquire capital. However, R&D Advance Funding has been designed to help the likes of startups and scale-ups.
If your business is an SME investing heavily in research and development, Advance Funding is a great option. You can use your intellectual property, innovation to get growth funding and continue your R&D efforts.
It allows you to keep hold of your stakes without having to sell shares. You don’t have to wait for equity rounds to close, and you don’t have to experience the high costs linked with early equity sales. With advance funding, there is no waiting time, and you can access the funds throughout the financial year.
Pre-Agreed Fixed Cost
Most lenders are transparent about the cost of advance funding. They provide competitive interest rates and only require a one-off bullet payment when the business has received its HMRC credits at the end of the loan.
For most businesses, this is highly advantageous as you know precisely what you’ll be paying. You don’t have to pay monthly, which means you can plan, no resources leave the business, and it gives you the ability to reinvest your funds into the growth of your business.
Advance funding is designed to help businesses with their R&D efforts, which is why most providers know the obstacles and challenges that businesses face.
How to choose an R&D tax credit advisor
Know which questions to ask before deciding on your next advisor.
Guide to startup funding in the UK
A breakdown of the different types of startup funding options for early-stage businesses in the UK. It includes government funding, equity financing, debt financing, crowdfunding, funding from family and friends, and bootsprapping.
How to make an RDEC claim
The complete guide to compiling and submitting an RDEC claim. Includes an explanation of the differences between the two schemes.
Guide to government funding
A breakdown of the different types of government funding available to innovative businesses in the UK. Includes Coronavirus response funding.
How to make an SME claim
The complete guide to compiling and submitting an R&D claim through the SME scheme. Including how it works, who is eligible, and how to apply for it.