R&D tax credit loans

Growth now, not later.

How R&D Finance can help you get there, faster.

First things first

What is the R&D tax credit?

For SMEs, the R&D tax credit is a government program that looks to incentivise companies working in innovative fields. HMRC does this by granting companies a tax deduction, or in cases where no tax is incurred – a tax credit. A company not conducting R&D can deduct 100% of their expenses from their tax burden. A company conducting R&D can deduct another 130% on top of that on expenses related to R&D. That makes the total deduction on R&D expenses 230%. As a rule of thumb, this means that the company can claim back around a third of what it has spent on R&D. And for companies that are pre-profit, this comes in the form of a cash tax credit, often an important source of liquidity in companies with high R&D investments that have not launched their products yet or are early in the market. 

The main R&D tax credit scheme is available to SMEs. A company is defined as a Small and Medium Enterprise if it has “less than 500 staff” and “a turnover of under €100m or a balance sheet total under €86m”. If a company is outside of the parameters of the SME scheme, it can still claim R&D tax credits, just under the more limited and lower return Research and Development Expenditure Credit (RDEC) scheme. For R&D tax credit loans, financing is available for companies within the SME scheme. Claims that fall in the category of RDEC have longer processing timelines and a more complex way of processing, so they are mostly unsuitable for financing.

Eligibility

Limited Liability companies that are corporation tax eligible and have invested a lot in R&D could potentially be qualified for a refund of up to 33% of relevant expenditure. Find out if your company is eligible.

Eligibility Test

What is an R&D tax credit loan?

An R&D loan is a new type of financial instrument that allows a company to use its future R&D tax credit payments as collateral for an affordable loan. The R&D tax credit is a sustainable source of operating cash for many UK firms, every year. Though it has been reliable for decades, one of the important problems with the scheme is that the funding is quite slow to materialise. Many companies end up spending many months, sometimes even up to a year, waiting for HMRC. With R&D Finance, they can access that funding in a couple of weeks. With a new funding timeline, you are able to grow faster than their competition, and gain the advantage.

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The funding feedback loop.

R&D Advance Funding can act as a virtuous cycle. As a growing, technology-focused company, chances are you will continue on your path of technology investment. Often, the R&D financing you receive will flow back into more R&D. As an example, if you use the R&D loan to hire an additional programmer, around 33% of their wages will add to a larger R&D tax credit at the end of the financial year.
This can lead to mitigated fees or potentially to a net benefit after financing.

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What do you need to apply for an R&D tax credit loan?

UK* based company

Pre-profit

Qualified R&D expenditure

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*Canadian or Australian based business also may be eligible.

Have a question?

No business or path to success and growth is the same. If you have a question, are ready to apply or would like to learn more about Fundsquire, please contact us today.

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