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Top Five Benefits of R&D Tax Loans

September 7th, 2016

The economy is tough right now.  No matter where you are located or what industry you are in, it can be a bit of a gamble when it comes to predicting next month’s profit margins.  One thing an economic downturn does create is a slowdown of operations, which can enable you to redirect more manpower and more resources into research and development.  It creates an opportunity to expand and diversify your business—something that the current downturn may be telling you is crucial to your business’s survival.  Of course, it isn’t quite that simple.  An economic downturn also means your business is subject to capital constraints and cash flow challenges.  With that looming financial stress, it can be hard to decide when it’s right to take money aside—and how much—to dedicate to R&D opportunities, even if they are the right step to take for your business’s continued growth and success.

The government has created a solution.  The R&D tax incentive serves as an incentive for businesses to make that financial investment into R&D with a promise of a tax gain at the end of the year.  However, in a rocky economy, promise of a tax credit in the future may not be enough to compensate for the financial risk you are exposing your business to now.  That’s where R&D tax loans come in.

R&D tax loans provide you with 5 important benefits that could help you build a stronger business.

1.  It eliminates the risk embedded in the delay

A number of financial institutions have begun offering businesses the opportunity to finance their future R&D tax incentives.  What this means is that businesses can finance their proposed tax gain in order to collect a portion of that credit now.  This means you can earn your credit when you need it to help you invest in R&D instead of waiting until the end of the year and exposing yourself to the risk involved in that expenditure.

2.  It can help you plan your investment

Knowing how much you are going to benefit from your R&D investment plays a big role in helping you to decide how much you are willing and able to put into that investment in the first place.  Plus, getting a portion of that credit early can help protect you while you are making your investment, or it can enable you to use that credit to make a more substantial investment, which will create, as a result, a bigger credit with even more future benefits for your business.  It allows your tax credit to work as an additional resource that can push your development plans forward.

3.  Clarity

Calculating your potential tax incentive in order to work out your financing can help give you a more accurate idea of how much of a tax incentive you’ll be getting in total, along with the timeline for those credits.  This means you can better plan your investments with a better idea of all of the resources at your disposal.

4.  Gain access to your own money when you need it most

Gaining access to a portion of that credit early means you have access to that money right when you need it.  If business were to hit a lull, you have a resource available that can help ensure R&D doesn’t have to slow down to accommodate the everyday needs of your business.

5.  It prevents the need for capital raising

By gaining access you a portion of your tax incentive early, you are able to use money that is, essentially, already yours to dedicate to the investments that will make that money possible.  It is money that is self-creating instead of debt-creating.  That boost can help you suspend the need for capital raising, or even evade it completely.

If you are looking for an opportunity that will help you make your R&D investments even more fruitful, contact us at Swanson Reed today.  Our dedicated finance professionals can help you manage all facets of the R&D tax incentive claim preparation process.