As startups and scaleups seek additional funding to fuel growth and offset the decline in equity investment from VCs, one under-utilised option they are increasingly considering is R&D Advance Funding.
R&D Advance Funding lets companies access their future R&D Tax Credit up to six months before their financial year-end, allowing them to leverage their future windfall when they need it most.
Find out why companies are turning to R&D Advance Funding below. To learn more about this solution and whether it’s right for your business, just get in touch.
Decline in VC funding causes funding bottlenecks
One of the biggest challenges facing any growing business is access to funding. A lack of capital prevents startups and scaleups from making key investments, conducting R&D, and commercialising their solutions, inhibiting growth.
Funding shortfalls can also prevent businesses from meeting essential, day-to-day obligations, such as paying salaries and rent, imperilling their very existence. Indeed, according to the ever-informative CB Insights, lack of cash is the number one reason startups fail.
The challenge has been made more acute by the recent decline in venture capital investment, a major source of funding for early-stage businesses. According to KPMG’s Venture Pulse, global VC investment is at its lowest levels since 2019, with investors showing “an abundance of caution” in response to unfavourable macroeconomic conditions: high interest rates, spiralling energy costs, and so on.
Fifty-nine per cent of SMEs say it’s now more difficult to access funding than at any point in the last five years, an uncertain period containing both the Coronavirus pandemic and the conclusion of Brexit.
Thankfully, equity investment isn’t the only show in town. Growing businesses have a range of funding options at their disposal, including tax relief, innovation grants and debt financing, which can be used to complement or, in some cases, replace equity investment.
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R&D Advance Funding - an underutilised option
One such option is R&D Advance Funding, an underutilised solution tailor-made for ambitious pre-revenue businesses.
R&D Advance Funding lets companies access up to 80% of their future R&D Tax Credit up to six months before their year end, providing a timely cash injection that can uncork financial bottlenecks.
While R&D Tax Credits can be an excellent source of funding for qualifying, loss-making businesses – allowing them to recoup up to 27% of their investment in eligible development-related costs like wages and raw materials – the scheme is only accessible after a company has completed its financial year.
This is often far too late for fast-moving startups and scaleups, which need a readily-available supply of capital to capitalise on emerging opportunities.
R&D Advance Funding solves this issue by letting companies access their R&D Tax Credit far earlier than is otherwise possible: as much as nine months ahead of schedule, factoring in HMRC’s processing times.
Companies can deploy their advance, which can be accessed in as little as two weeks, to bridge upcoming funding rounds, complete fundraises on better terms by allowing them to hit key milestones before a fundraise, and launch new products and services well ahead of the competition.
Case Study
Advantages of R&D Advance Funding
R&D Advance Funding has several advantages over other forms of funding.
Accessible and inexpensive
As it’s secured against your future R&D Tax Credit claim, the strength of which is validated by GrantTree’s R&D Tax experts, R&D Advance Funding is usually much cheaper than other forms of debt financing available to pre-revenue businesses.
Fast and simple
Approval for R&D Advance Funding is based on company credit information that is readily available, so there is no long-winded, labour-intensive due diligence process. Once you’re approved, you’ll receive your advance in under a week.
No monthly payments or personal guarantees
There are no monthly interest payments. You simply repay your advance plus fees once you receive your R&D Tax Credit. Plus, you won’t need to provide personal guarantees.
Grow your future credit
If you decide to invest your advance in additional R&D, you’ll likely increase the size of your R&D Tax Credit come claim time.
Learn more about R&D Advance Funding
R&D Advance Funding lets you supercharge growth by providing a well-timed, affordable cash injection.
To learn more about R&D Advance Funding and find out whether your company qualifies, just get in touch. Our team would be happy to help!
