Whether it’s already a source of funding for your business, or applying for an advance is parked on your to-do list, it’s worth putting your R&D finance knowledge to the test. That way, you can be sure of choosing the right capital and financing options for your business.
Blue-sky or bust?
The term R&D can conjure up images of scientists, in white coats, working in a lab or trying to solve a ground-breaking equation. But when it comes to the R&D tax incentive (RDTI), it’s not only fundamental research that qualifies — far from it. Many businesses that qualify for the RDTI aren’t doing blue-sky research. Instead, a significant number use R&D as a sideline to improve their products or services. Be sure to check whether your business is eligible for the RDTI and register your research with the Department of Industry, Science, Energy & Resources. In a nutshell, R&D finance is a loan that lets you access your R&D refund early. It’s inextricably linked to the RDTI. So, if your research — blue-sky or otherwise — is eligible for the RDTI, your business is eligible to apply for R&D financing.
Last chance saloon or first port of call?
In certain circles, R&D finance providers are considered lenders of last resort. But nothing could be further from the truth. More and more innovation-businesses are making smart R&D finance their first port of call and with good reason. We partner with Radium Capital, a provider of this smart R&D financing. Its online platform makes applying for an R&D advance a streamlined, easy process. If you have all the necessary paperwork in place, your loan will be approved in just two business days. Once you sign your loan documents, funding will reach your bank account within three business days. Typically, there is no security required for a Radium Advance other than your upcoming R&D tax refund, which means your business won’t become too diluted either.
Affordable finance or costly capital?
R&D financing can have a reputation for being expensive. The reason is the first R&D finance offerings that emerged following the 2011 launch of the RDTI were complex and expensive. Finance providers had to source funding from investors, and loans could take up to eight weeks to secure. R&D financing options today provide a better solution. Radium Capital, for example, avoids these pitfalls by using its ring-fenced pool of capital and proprietary online platform for businesses seeking R&D advances. These two important differences make accessing R&D finance quick, easy and affordable for eligible companies. Fixed interest rates and a nominal arrangement fee make these advances a cost-competitive R&D funding option too. Radium Advances are also structured to be as cash flow friendly as possible with no repayments until the company’s R&D tax refund arrives. Some businesses fear accessing R&D finance will leave them with nothing left over from their R&D refunds. This concern is unfounded. Radium Advances, for example, have a maximum loan-to-value ratio of 80%. The net effect is the company’s R&D refund more than covers the loan costs.
Big fish or small fry?
It’s a myth that only big businesses are eligible for R&D financing. The main focus of the RDTI and R&D financing is supporting companies with R&D. But when you consider how the cash refund element of the RDTI is structured, it’s the smaller firms that the RDTI and R&D finance have in mind. Only businesses with annual aggregated turnovers of under $20 million and yearly R&D investments from $20,000 are eligible for the R&D tax refund and R&D advances. Another misconception is that being successful with R&D is one of the eligibility criteria for the RDTI and R&D financing. This is certainly not the case. Not getting the research outcomes you were hoping for doesn’t preclude you from receiving the RDTI or R&D advances.
One-off or regular cash flow
Many businesses are under the false impression that they can only use R&D financing to access their R&D refund once a year. In reality, with Radium Capital, companies can have as many R&D advances as they need in a 12-month period. Indeed, the more advances that businesses get, the more it benefits their R&D because it triggers additional tax refunds when the advance is reinvested back into R&D. For example, if your business were to lock in a Radium Advance every quarter, for the same investment, you would be able to spend up to 50% more on R&D or reduce your capital outlay by 33%.
Another mistake is businesses thinking that they can only apply for R&D financing during the financial year their R&D took place. Under the RDTI rules, businesses have up to 10 months following the end of their income year to register their eligible research. It’s only once they lodged their company tax return that they’ll receive their tax refund. So they can apply for a R&D finance any time before their tax refund arrives. The financial year the research occurred, and the 30 June financial year deadline are not crucial when it comes to R&D finance.
Take the next step
If misinformation has caused you to pause your R&D financing plans, you’re now armed with the facts. Radium’s expert advisers are here to help you find the best ways to fund your R&D programs.
Don’t hesitate to reach out for advice on what’s right for your business and R&D. Get in touch with Carbon’s R&D specialists today.