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Bridging loans help businesses waiting for R&D tax claims

Research and Development (R&D) tax credits are a government scheme that rewards UK businesses that invest in developing new processes, products or services.

The average R&D tax credit is worth £61,314 to small and medium businesses. In 2017, there was a 20% increase in companies claiming R&D tax credits. If this growth continues, there could be delays in processing claims due to the increased volume.

HMRC aims to pay R&D tax credits within 28 days, but more complex cases can take longer. There are times of year when the HMRC handles larger than normal claim volumes and this can delay the processing of individual claims. Smaller company payments will generally take less time than larger companies, and there have been cases where businesses have waited up to six months for payment.

If a business has low cash flow and requires some working capital, there are some lenders who will provide a bridging loan that can be repaid after the tax credit is received. Loans from £50,000 to £250,000 are available. Like all bridging loans, an asset is usually required for the loan security. This can be property, but other assets will be considered.

Many large lenders will not provide bridging loans based on expected R&D payments. A bridging broker will be able to find a smaller specialist lender that will consider bridging loan applications for businesses waiting for R&D tax payments. They can apply for loans based on a percentage of the value of the expected tax payment.