This is our short guide to R&D forward lending, updated regularly to help you understand if this type of loan is for you and to see why it’s an easy way to access capital that a lot of innovative companies in Australia are using in 2020.

What is R&D Forward Financing?

Call it Forward Funding (R&D FF), R&D Finance, Advance Funding, or anything else, the point is the same – accessing your future R&D tax incentive early. The lender uses this future estimated receivable, based on your R&D activities up to that point, as collateral for a loan.

How does the R&D forward funding process work?

The application is easy and usually takes from one week to a month to get from that initial chat with the lender to the point where funds are made available.

  • The first step is chatting to an R&D lending consultant. They will ask a few questions to understand what your needs are, and then will ask for a bit more information.
  • The next step is initial due diligence. The lender will have a look at two main areas: your history with the R&D tax incentive (also if you’re eligible to get a tax offset if your income tax is high, or a tax refund) and also at a few health parameters of the company. You may need to provide documents like a cash flow forecast and management accounts.
  • The next step is receiving a term sheet that has the headline terms of the potential loan. After you sign the term sheet the credit review can start.
  • If the credit review checks all the needed points, you’ll be given a loan agreement and after that a payment schedule.
R&D forward financing

What are the benefits?

You can reinvest in R&D and grow your refund payment

Companies with a lot of R&D will probably use at least part of their loan to invest in tech. For example, if the money is used to hire another tech team member, their eligible salary will count towards the R&D tax incentive by the end of the financial year.

Stay in control

For most early-stage and scaling companies, selling equity seems like the only way to grow beyond bootstrapping. Research and development finance can be a great alternative, as it uses a future payment to fuel cashflow in the present. This allows founders to keep more of their company, especially in the early stages, where investors will be most aggressive with the cost of capital to offset risk.

Speed up your route to market

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 R&D FF, the business can get funded early, helping it accelerate past the competition.

Selling equity is expensive

Selling equity, especially early on, can be a very expensive undertaking, especially if you manage to grow the company to the size that fits your idea. With debt, like R&D tax FF, it’s no secret what you’ll need to pay the lender – principal plus interest.

The R&D FF application is easy, takes 10 minutes, requires no obligation on your part, and does not affect your credit score. Click here to chat with a consultant and see if you are eligible:

Pre-Apply to Check Your Eligibility

Alex Kepka

Alex is a tech-focused funding expert, helping innovative companies grow through innovative funding through her work at Fundsquire. She also has a background in journalism, having written for outlets like Vice and many others in the past on topics ranging from philosophy to economics.