R&D; Advance Funding

What is Advance Funding?

Advance Funding is the easiest way to access your future R&D tax credit earlier in the year, making use of the funds and reinvesting them at a critical time. The future R&D tax credit is used as collateral of a loan facility that is repaid once HMRC makes the final payment.

How does Advance Funding work?

As the R&D advance service is similar to accessing any type of loan, it is just based on your future tax relief payment from HMRC instead of a different kind of collateral.

• The first step towards funding is having a conversation with a consultant. They will make the next steps and requirements much clearer, check claim eligibility, and give you more information on the process.
• Then, the business will have to go through due diligence. In this process, we will analyze two important areas: your history with the R&D tax credit claims - this involves assessing also if you’re eligible to get a refund or an offset if you have a high tax liability, and also other important KPIs related to your business, like cash flow, relevant expenditure and other forms of debt you may need to service. You may need to provide documents like a cash flow forecast and management accounts. At this point, we also work with your R&D tax credit consultant team to assess the claim and technology. If everything falls into HMRC’s definition of science and research for R&D tax credits, we’re good to go on to the term sheet.
• The next step in the process is the credit review and this involves our team having a closer look at the documents you provided and preparing the loan documents.
• Then we get to the payout of the funding which will then be paid back by HMRC through the R&D tax credit mechanism. The tax credit advance can be accessed at any time during the financial year, and typically requires about 6 months of spending on at least one eligible innovation project or technology.

What are the benefits of the Advance Funding of R&D Tax Credits?

Invest in more R&D and increase the size of the incentive payment

Businesses that invest a lot in R&D typically make use of the R&D advance to continue that pattern. This means that any new developers or engineers hired with the funding acquired through the R&D advance will be eligible to be counted as an additional investment in innovation and development and flow into additional claim value at the end of the fiscal year, increasing the size of the final R&D tax credit that the company can claim from HMRC.

Control your R&D tax credit timeline

A lot of startups and scale-ups are stuck in the mindset that the only way to get capital for an early-stage company is through selling equity and that debt funding isn’t an option early on. Research and Development Finance like Advance Funding is available specifically for these companies, especially if their forte is innovation. It’s an easy way to use the company’s intellectual property, its innovation (even if it is incremental, by the definition laid out by HMRC) to get growth funding in the present.

Founders get to keep more of their business, don’t have to wait for complex equity rounds to close, and can access money when they most need it without having to incur the high costs associated with early equity sales. Accessing R&D tax credits becomes a simple way to access cash at critical times throughout the year, instead of a once-a-year form of support from the government.

Accelerate your next move

For tech companies, speed is crucial. Most times, founders know exactly what it takes to achieve their goals, but get stuck in different bottlenecks. One is hiring the right people, but even more commonly the bottleneck is money.

With the advance funding of R&D tax credits, the company can make strategic investment decisions early in the year, plan its cash flow accordingly, and race past the competition both in technology and marketing investment, as the funds once accessed can be used for any purpose, without limitations from the loan.

Protect your equity

Selling shares can get very expensive if you have a growing company but are reliant on this type of funding to fuel growth. If the company reaches product-market fit early on, parting with too much of it for funding that the company will gain back through future sales can impact the bottom line significantly, so finding finance options that protect the founder’s stake is crucial. With loans like R&D tax AF, the cost of financing is clear upfront and does not involve any long-term commitments.

The application for the advance funding of your R&D tax credits claim with Fundsquire is simple, typically only takes around 5 minutes, involves no obligation on your part, and does not affect your credit score or application for any other loans with us or anyone else. The application typically takes between a few days and two weeks, depending on the complexity and how fast the needed documents are produced. We try to move as fast as you can!

Our team is here to help you assess your eligibility, see how you fall into the scheme, explain any costs related to this or other types of SME funding services that we offer, and could refer you to other forms of either debt or investor funding in our network. We offer Revenue Based Finance services and more types of funding related to video games tax relief and film tax credits, but our partners can usually help with anything from invoice to asset and property finance, including any form of consulting around R&D matters that you may need.

Chat to us if you have an upcoming claim for your business or even if you are unsure about eligibility in the R&D tax credit scheme, our team can point you in the right direction.