SR&ED and grant financing in Canada

What is SR&ED and grant financing?

SR&ED is Canada's main research and development incentive. Canadian controlled private corporations typically get a refundable federal credit of about 35% on eligible research spending, plus provincial credits, which together often return 40% to 60% of qualifying costs in cash. The catch is timing: you spend during the year, file after year end, and the CRA pays months later.

SR&ED financing bridges that gap with a loan secured by the expected refund. Some lenders advance after the claim is filed; others advance quarterly during the year on accrued spending. Grant financing works the same way against signed agreements from federal programs such as industrial research assistance or from provincial funds.

Who qualifies for SR&ED and grant financing?

You need to be a Canadian corporation with a credible SR&ED claim, ideally one or more prior claims the CRA accepted, prepared by an experienced consultant or accountant. Lenders also want to see that the company can keep operating until the refund arrives, because a company that fails before the CRA pays is their main risk.

• Declined most often: first time claims with no consultant, claims flagged for CRA review, companies with tax arrears, since the CRA offsets the refund against them, and companies with under three months of runway.
• Grant financing needs a signed contribution agreement; a pending application is not enough.

What does SR&ED financing really cost?

A typical example: your claim should return $400,000. A lender advances 70%, $280,000, at 1.5% per month with a 1.5% setup fee. The refund arrives five months after filing, so interest is $21,000 and the setup fee $4,200, about $25,000 to have $280,000 five months early. Annualized, roughly 18% to 20%.

If the CRA reviews the claim and payment slips to nine months, interest rises to about $38,000. Quarterly advances cost more because they run longer, but you use the money while you spend it. Compare the cost with the dilution of equity or the terms of venture debt, and see business loan rates explained for how to annualize a monthly fee.

How do you qualify, and what documents do you need?

Expect to provide the current or prior SR&ED claim with its technical narrative and expenditure schedules, your consultant's details, CRA notices of assessment for prior claims, corporate tax returns, interim financial statements, bank statements, your cap table and a cash flow forecast to the expected refund date. Grant financing adds the signed contribution agreement and claim schedule.

Our document checklist covers the general items. What speeds approval most is a clean CRA history, with prior claims paid in full without review, and proof that your taxes are current, since arrears come off the refund before you see it.

How long does SR&ED financing take?

Typically one to three weeks from application to funding for a first facility, and a few days for renewals. Lenders that specialize in SR&ED underwrite the claim quickly because they see hundreds of them; general lenders take longer and advance less.

The refund itself is the long pole. The CRA aims to process refundable claims within 120 days of filing when they are not selected for review, and reviews add months. Filing promptly after year end with a complete technical narrative shortens both the loan and the wait. See how long business loans take.

When should you choose something else?

Choose venture debt if you have institutional investors and need more than the refund covers; it is a larger, longer facility, and many venture lenders finance the SR&ED claim within it. Choose revenue based financing if you have recurring revenue but no claim yet.

Skip SR&ED financing if your claim is small or uncertain. Paying 18% to 20% annualized on an advance against a $40,000 claim that might be reviewed makes little sense; wait for the refund. And never treat the advance as income: if the CRA cuts the claim, you owe the difference.

How do you apply for SR&ED or grant financing?

Apply once on this site with your claim or grant agreement, and your application reaches Canadian lenders that specialize in SR&ED and grant financing, alongside venture debt and revenue based options if those fit your stage. It is free for your business, and we are paid the same whichever lender you choose. Or ask your AI assistant to apply through our MCP server: it reads your claim documents and financials, fills the application and submits it.