R&D Lending: What it is and why you should use it
R&D Lending, also known as R&D funding, is an advance funding based on your future R&D Tax Incentive rebate.
For many companies based in Australia, the R&D Tax Incentive is a consistent source of funds necessary when in the research and development phase. The Tax Incentive Rebate is the most common source of funds for Australians but not always accessible at the time you need it. R&D claims can only be lodged 10 months after the end of your financial year, but what if you require funding during the development stage months before you can lodge your application?
R&D funding relies on the organisation’s future R&D Tax Incentive payments as security for a debt facility. R&D funding allows companies to access the funding they are eligible for in the year that the expenditure occurs, so they do not have to wait an extra financial period to use this money to grow their business.
What are the Benefits of R&D Lending?
Combating Unnecessary obstacles
There is a multitude of benefits a business can access through R&D lending.
With R&D lending, you will not need to wait until the end of the financial year to receive funding. This dissolves the unnecessary obstacles that innovators can face when they are developing and growing their business.
As an innovator, it is important to continue creating and evolving your company without the stops and starts that can be caused by a lack of funds. With R&D lending, raising capital will no longer be a problem for your business.
This means you can focus on widening the scope of your business to progress your R&D and ultimately take your innovation to market.
With typical money loaning or investments in your business, risks can arise in the form of funding management, potential loss of control & dilution of equity.
In attempting to raise funds or gather investment interest in order to secure development money, some companies will turn to capital raising and the selling of their equity. This can dilute control and disperse the eventual profits while a company is still in crucial development stages.
R&D lending cancels out those risks and provides a lending platform you can be comfortable with.
Additionally, companies that provide R&D lending do not work on a ‘copy and paste’ process and instead tend to work with companies on a case-by-case basis with their funding management. This can allow innovators to better milestone their projects and work with their company’s financial needs.
Creating a new cycle
A major advantage of accessing R&D funding early is that it can create a beneficial cycle for your business.
When a company accesses R&D funding early in the year, based on the expected eligible R&D expenditure at the end of the financial period, it can reinvest those funds in R&D. The result is that your company increases the size of the final R&D Tax Incentive benefit because more money was available for R&D investments during the year.