Is your R&D about to fizzle, and could bridge financing be the answer? Moving past 1 July can seem like there’s light at the end of the funding tunnel. After all, your R&D tax refund is just around the corner. But many of our clients find their plans to complete their tax return in July go on the back burner. And the day-to-day running of their businesses takes priority. So we’re taking a look at how you can use financing to bridge a short-term capital gap and avoid an all-too-common hiatus in your R&D funding this new financial year.
Why build a capital bridge for your R&D?
A well-timed capital injection during July and August could help your innovation chalk up runs on the board early in the new financial year. And it can even set the scene for continued success for your business and R&D during the months that follow. Making progress and speed to market are everything in the innovation world. So keeping that all-important R&D capital flowing gives you that additional peace of mind that you’re not losing a step and missing crucial opportunities.
Many start-ups and businesses doing R&D are eligible for the Federal Government’s R&D Incentive (R&DTI). The requirement to maintain detailed, contemporaneous records for this incentive means many companies in this position have reasonably complex tax returns that they can’t complete quickly. By contrast, applying for a bridge loan, for example, a Radium Advance — which lets you access your R&DTI refund early — is quick and easy.
If you need more information about how to keep contemporaneous records for your R&D, read our blog, Contemporaneous records and the RDTI: what you need to know.
What types of bridge financing are out there?
Bridge financing, by its nature, is fast, short-term finance that helps you build a capital bridge. It tides you over so you can continue to fund your R&D. That means equity funding from a Venture Capitalists or even a Business Angel is off the table because of the significant due diligence typically required. The timeline for equity crowdfunding is also on the long side if you need capital pronto. Debt-based crowdfunding from alternative lenders might be an option. But larger loan amounts (over $150,000) are often secured. You usually have to meet eligibility criteria relating to your business turnover and demonstrate that you’ve been trading successfully for many years. Consequently, new businesses and start-ups may not qualify.
Business loans
So that leaves debt financing such as business loans and credit cards. Loans from traditional lenders, including banks, can be fiendishly hard to obtain. And they’re increasingly expensive with rising interest rates especially for non-revenue, innovation-focused start-ups. Banks tend to view new businesses like these as risky. But at Radium Capital, we don’t think like a bank, so we see risk and security differently. Indeed, lending to businesses with R&D is what we do. We’re experts in R&D financing.
Credit cards
Credit cards are not the silver bullet you may think they are. Most cards typically require you and your business to have an ABN. You’ll also need good credit scores and crucially to have been trading for at least 12 months. So this can rule credit cards out for many new and early-stage businesses. Even if you can access a credit card to tide you over with your R&D expenditure, there are the annual fees and monthly interest costs to consider. With Radium Advances, there is nothing to pay until your R&D refund arrives, and if you reinvest your advance in more R&D, you trigger additional tax refunds. The money you borrow can literally make you more money.
Why R&D financing?
R&D financing is far faster and more straightforward than trying to complete your full tax return. And rather than waiting weeks or even months to receive your R&DTI refund, with Radium Capital, you can access your money in just a few business days. In the current climate of market volatility, rising interest rates and higher hurdles to secure venture capital, Radium Advances remain as reliable and affordable as ever.
Reliable, affordable and cash-flow friendly
Providing you’re eligible for the R&DTI, you can apply for a Radium Advance. Our interest rates are fixed, at 1.25% per month or 1.17% per month for repeat borrowers. So you know precisely what your R&D financing will cost before you sign your loan documents. And because your tax refund isn’t too far away, you’ll probably only have your Radium Advance for a few months. This makes your financing with us even more cost-effective. Another plus point of Radium Advances is they are cash-flow friendly. There are no upfront fees and no repayments until your R&D refund comes through.
Flexible and scalable
The Radium Advance can be used as a cash flow injection and as a form of bridge financing for your R&D. We work with businesses of all sizes, with big or small loan requirements. We don’t place lower or upper limits on the amount you borrow. And our product is entirely flexible. That means you can use your Radium Advance as a single short-term bridging loan for your R&D, or more strategically, where you access multiple Radium Advances to increase your R&D tax refund. This is possible because you can have as many loans of whatever size you need and at intervals that suit your R&D capital requirements.
Setting your R&D up for success
The unique flexibility and scalability of Radium Advances mean you’re in the driving seat when it comes to how you use our financing. You can use a Radium Advance tactically and as a one-off burst of capital. A quick cash flow injection can be ideal when you want to build a financial bridge for your R&D at the start of a new financial year, when an R&D project comes to an end, or whenever your business needs fast finance to boost cash flow.
However, a notable feature of R&D financing and Radium Advances is that if you reinvest the capital into more R&D, you accrue a larger refund from the tax office. The number and frequency of Radium Advances you access and how you use this capital will determine the boost your R&D refund and R&D budget will receive. Under a quartely re-investment model, for example, clients can boost their R&D budget by 50%, or reduce capital outlay by 33%. It’s all possible because, providing you have eligible R&D expenditure, there is no limit on the number of Radium Advances you can access throughout the financial year. There are three popular strategic models for using Radium Advances. If you’re keen to learn more about the different R&D financing models for Radium Advances to support your innovation goals, read our blog, Funding your innovation: Which R&D financing model suits your business goals?
Start FY23 on the front foot
Don’t let your R&D plans stall this winter. Radium Advances are an affordable, fast and non-dilutionary capital solution to support your innovation. So why not talk to one of our friendly R&D experts today to see if your business is eligible? We only need a few documents from you to get the ball rolling. Once we receive these, we can get you up and running in our customer portal. Then you can complete your loan application in 15 minutes. Chat with one of our advisers today to find out how much you could borrow and get your R&D onto the front foot this financial year.