FAQ

Understanding R&D Finance.

Here are some of the most commonly asked questions about R&D advance funding. That said, at any time please contact us for a one-to-one conversation about your eligibility and needs.

What is Advance Funding of R&D tax credits?

The R&D tax credit is an incentive program run by HMRC that entitles companies to claim up to 33% of their eligible expenditure in the form of a corporation tax reduction or a cash payout. This money can only be accessed after the completion of the fiscal year in which it was incurred. This is where Fundsquire comes in – we can advance up to 80% of a future R&D tax credit up to 9 months before the company is eligible to claim the funds from HMRC.

 

What companies qualify for the R&D tax credit?

Checking if you qualify for an R&D tax credit is somewhere between an art and a science, but companies that have strong investments in complex technology almost always qualify. HMRC’s page on R&D tax credits explains qualifying activities and spending a bit more in detail.

What are the application criteria for Fundsquire’s R&D tax credit loans?

We look at a company from two angles: the R&D tax credit itself and the company’s overall health. On the level of the R&D tax credit claim, we work with a series of partners and external consultants to ascertain the size of the potential tax credit. The minimum size for a Fundsquire fundable R&D tax credit is around £100,000 at this time. This is equivalent to over £350,000 of eligible expenditure per financial year.

The other criteria relate to the company’s overall health in the next year. This means we’ll take a closer look at a cashflow forecast, the P&L, the balance sheet, and the management accounts. This is usually enough information to lead us to a Term Sheet decision. After signing the Term Sheet, in the credit review, we will ask for a few additional clarifying and identifying documents.  

 

How long does the application process take?

The application typically takes around 3-4 weeks depending on complexity and how fast you are able to provide the needed documents.

 

Are there any other costs or charges?

We charge a 3.5% facility fee that covers the costs of the due diligence and credit review. 1.75% of that is paid upon signing the term sheet and will be refunded in the case of a failed credit review.

 

Must my business be profitable?

No, we work with many pre-profit, and even pre-revenue companies.

 

Can I repay early?

Yes, and there is no penalty in early repayment.

 

How much can I borrow?

At the moment we can offer loans between £100,000 – £3,000,000 but higher loans are negotiable on a deal-by-deal basis as well.

 

What sectors do you lend to?

We lend mostly to companies in the technology space, but we are not strangers to manufacturing either. Essentially, any company eligible for an R&D tax credit can be eligible for R&D tax credit Advance Funding.

 

Do you deal with distressed businesses?

No, we do not lend to distressed companies, as the R&D tax credit is not paid out by HMRC to companies with this profile.

 

Do you take personal guarantees?

No, we do not take personal guarantees.

 

Our business has a registered charge already, does that exclude us from qualifying?

This is not a knock-out criterium, but we will have to register a first order charge at least for the R&D tax credit. This can be negotiated with your other charge holders and set in place through a Deed of Priority.

I want to borrow – why should I choose Fundsquire?

Fundsquire has extensive experience in understanding both the R&D tax credit and the factoring process. This is why we can advance your R&D tax credit earlier and more cost-effectively than any other player in this space. We understand your technology, your eligibility, your funding roadmap, and your particular needs.

 

How do I pay interest and repay the loan?

The interest and principal will be paid off when you receive the payout from HMRC. We work with holding and/or escrow accounts and the difference between Fundsquire’s fees and principal and the HMRC payment will be sent to your account.

 

Where does the funding come from?

The funding is a mixture of Fundsquire’s own capital and funding from a broad participation network of individual and institutional investors.

 

Post-funding, what happens?

Once the Loan Agreement has been signed and payments have been made, the loan enters the Monitoring phase. This is a monthly check-in with a credit specialist who will ask for updates and revised documents. This will continue until the loan is paid back upon repayment by HMRC.

 

What sets Fundsquire apart from the industry in terms of Credit Analysis?

We have a deep understanding not only of the company level credit risk but also of the underlying asset. The UK’s managing team have had many years of experience working in R&D tax credit consulting and also in London Tech. We understand not only the technology but also HMRC’s perspective on eligibility for the scheme.

 

Why is Fundsquire a smarter source of growth?

Fundsquire lets you make the best use of your resources at the time that you need them. We don’t just issue R&D tax credit loans, we seek to understand your business, your technology, and your vision. Most of our clients have become long term partners because they trust Fundsquire, and we trust our clients.

How much of the future claim can you lend? What is your LTV?

We typically lend between 50-85% of the estimated value of the future claim, depending on our familiarity with the processes of the claiming specialist and your particular funding needs.

 

What security do you take?

A debenture with a fixed and floating charge

 

Do I need to work with an R&D Tax Credit advisor?

Though you do not need to work with an R&D advisor, we will need a Funding Eligibility Review document completed by a specialist consultant or accountancy.

 

Do I need to change my R&D Tax Credit advisor?

No, we can work with most R&D Tax Credit advisors, but the LTV(Loan-to-Value) rate might differ depending on our familiarity with the specialist. The LTV represents the percentage of the approximate claim value that we can lend out.

 

What happens if the R&D Tax Credits claim is delayed?

We set a short stop date at the expected time of repayment, then a long stop date after 2 months, on average. Until the long stop date, the same interest is incurred, after that 4-6% are added, annually. We try to work with our clients to set a reasonable payment schedule if these delays drag out for longer.

 

What happens if the R&D Tax Credits claim is not paid?

As part of our due diligence, we work with reputable consultants who will be able to estimate a claim size relatively accurately. Given our specialist approach, it is next to impossible for HMRC to not pay out a claim, but it is possible for them to amend the claim size. We manage this risk through the Loan-To-Value rate. In the extreme case that no claim is paid out, we will engage other avenues to receive payment, working with the client to create a reasonable repayment schedule.

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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