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September 23, 2020

Innovate the smart way through R&D Grant Financing

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R&D (Research and Development) for any business can be expensive - even with the Australian Government’s R&D Tax Incentive Program. However it plays a crucial role in any business to foster growth and innovation.

The R&D Tax Incentive Program administered by the Australian Federal Government can return up to 43.5% of the expenses for your R&D  ventures. But here is the catch. Businesses will have to wait until after the financial year to see any cent of the rebate that they are entitled to.

This is where the R&D financing can come into play.  R&D financing is a loan that may give businesses access to their rebate prior to the finalisation of annual tax returns.

So, what do you need to know about R&D financing?

  1. R&D does not have to be your company’s primary source of activity.
  • The activities related to your R&D ventures need to be performed in Australia, however that does not mean they need to be your main source of activities. It also means that you can still do other business activities in Australia and overseas.
  • For example, your business can still invest in resources to further develop the product/ service. As such, the Government’s R&D grant.

  1. Lenders of R&D finance is a last resort: WRONG!
  • In fact, it should almost always be the opposite. Being able to borrow eligible R&D expenditure during the financial year means that you can actually reinvest into further R&D activities.
  • In addition, by borrowing the relevant R&D expenditure during each quarter and reinvesting, creates the strategic opportunity to trigger extra rebates.
  • Win-Win.

  1. R&D Grant Facilitation is a smart option..
  • Many believe that R&D financing can raise capital, but it is expensive. This is a myth. .
  • On the contrary to the traditional way of raising capital sources for startups, where the process and resources are hard to access, R&D financing is equal to or less expensive than other finance options.
  • R&D financing is a lot simpler and easier to access, especially in terms of the application process.

  1. R&D grant financing does NOT need to leverage your business assets to be secured.
  • Businesses can be hesitant when seeking R&D financing as they are under the misconception that it needs to be secured against your business assets.
  • This simply isn’t true, as R&D finance has no security over your  business assets at all.
  • Instead, it uses your future expedcted R&D refund as the only security over the funds. This is a big positive, as it equals increased financial performance on the books and well as in the bank, with the benefit of not diluting your business.

  1. Your outstanding balance left from your R&D refund will be left dry by the time you paid principal and interest: AGAIN, WRONG!
  • Many businesses stress that they won’t have anything left in their pockets after their R&D loan has been repaid.
  • With providers of grant facilitation, there will be a decent amount of the tax R&D refund left over for the business at the completion of the process.
  • They have a finance agreement which is typically 80% of the expected refund, meaning you will have a substantial amount left over for peace of mind.

Whilst Mark Bouw Group is not a provider of R&D Financing and does not receive commissions from R&D finance companies, we believe that R&D Financing from experts such as Radium Capital could assist to achieve your innovation goals. Contact the Mark Bouw Group for more information.

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