R&D Cash Flow Loans FAQ's
What is the R&D Cash Flow Loans initiative?
The R&D Cash Flow Loans Initiative will provide up to $50 million in low-interest loans to eligible Victorian small-medium enterprises (SMEs) that are claimants of the Commonwealth Government’s R&D Tax Incentive.
How long will the R&D Cash Flow Loans initiative run for?
The R&D Cash Flow Loans Initiative is a short-term initiative with all loans to be repaid in full by 31 October 2023.
How much funding is available under the initiative?
A total of $50 million in loans are available under the R&D Cash Flow Loans Initiative
Will more funds be made available if the $50 million is exhausted?
No. Funding for the R&D Cash Flow Loans Initiative is capped at $50 million.
Will the debt be recycled?
No. Once the $50 million in total capital has been committed it will not be recycled. That means that in cases of early loan prepayment, or if some Borrowers elect a loan term shorter than 28 months, the capital will not be reallocated to new Borrowers within the funding period.
Who is eligible to apply?
Please see Program Guidelines
Invest Victoria reserves the right to exercise its discretion when assessing whether the activities of an applicant are consistent with the policies and procedures of the Victorian Government.
Applications received after the loan fund is expended will not be considered. Invest Victoria will make best efforts to keep the website updated with regards to funds committed, however reserve the right to return applications without assessing them, when funds are expended.
Providing evidence of receiving a refundable R&D tax offset is an eligibility requirement, how many years of offsets are required?
Evidence of receipt of a prior year’s refundable R&D tax offset is required to be eligible. Therefore, for the majority of companies the most recent receipt of a refundable R&D tax offset would be that of the 2019-2020 financial year (FY20).
If evidence of receipt of an FY20 refundable R&D tax offset is provided, a minimum of one year is required. However, if the evidence of receipt of prior year R&D tax offsets is before FY20, a minimum of two years is required.
Evidence of receipt of all refundable R&D tax offsets (including FY21) are to be provided to Invest Victoria . Failure to provide this evidence, or failure to receive a refundable R&D tax offsets due to a ruling by AusIndustry or the ATO, will lead to an event of default and trigger early repayment of the loan.
Furthermore, throughout the life of the loan companies are required to have a confirmation of expenditure letters also from R&D tax agents. Failure to comply will lead to an event of default.
What constitutes an approved R&D tax agent?
Decisions will be made on a case-by-case basis, with advice provided by independent commercial advisors to Invest Victoria.
My business generates, or is forecast to generate, more than $20million in group aggregate tunover, and therefore claims the non-refundable R&D Tax Offset. Am I eligible to apply?
No. The R&D Cash Flow Loans initiative is only available to companies who are claimants of the refundable R&D tax offset, and therefore have less than $20 million in group aggregate turnover.
What is the application process?
Applicants should start by submitting an enquiry form through the Invest Victoria website.
How will applications be assessed?
Applications will be assessed in the order they are received. See also Program Guidelines.
What is involved in the credit assessment process?
The credit assessments will be conducted with the assistance of an independent commercial advisor appointed by Invest Victoria. The advisor will assess:
- financial risks;
- non-financial risks;
- R&D Tax Incentive specific risks.
How long will it take to assess applications and to recieve and outcome?
Invest Victoria intends to undertake assessments and notify applicants of an outcome approximately four weeks from receiving the complete application. If the application is missing required information applications will take longer to process or may not be eligible for assessment.
How do I accept an Offer?
An Offer will be made to successful applicants via the provision of a Loan Agreement. Returning a signed loan agreement via post will constitute acceptance of an Offer.
If my application is declined can I seek further clarification?
Invest Victoria reserves the right to decline loan applications and decisions will be considered final.
Who will hold information about my business?
In Victoria, the Privacy and Data Protection Act 2014 protects information held by Victorian Government Departments and Agencies. We protect the privacy of your information. We endorse fair information handling practices and use of information in compliance with our obligations under the Privacy and Data Protection Act 2014 (Vic). Loan Applications will be used only for the intended purpose.
For more information contact us
Who is Invest Victoria?
Invest Victoria is the State Government of Victoria's investment attraction agency, fostering long term economic prosperity by enabling business opportunities and job creation for Victoria.
Invest Victoria does not undertake R&D tax assessments.
My company works off a January to December financial year, how will this impact my application?
There is no material impact for companies who work to a January to December financial year. Applicants will, however be encouraged to take a 24 month maximum loan term, as the duration of the program will only cover two financial years of R&D Tax Incentive claims.
I do not like a particular clause or condition in the loan agreement, may I have it removed?
No. The loan agreement follows a standardised format to ensure the program can be administered efficiently. The terms and conditions of the loan agreement may not be suitable for your business circumstances. Applicants are required to seek independent legal and/or financial advice before applying under the R&D Cash Flow Loans initiative, to ensure a thorough understanding of the potential legal and/or financial implications of entering in to a loan agreement under the R&D Cash Flow Loans initiative.
What loan terms are available?
Loan facilities are available for terms ranging between 12 and 28 months.
Assuming a loan execution and drawdown in July 2021, a 28 month loan term would seek to provide debt finance that covers the 2021-2022 financial year (FY22) and 2022-2023 financial year (FY23) periods of R&D expenditure, whilst allowing time for receipt of the FY23 refundable R&D tax offset, to most efficiently repay the principal.
How much can I borrow?
Loans will have a minimum size of $250,000 and maximum of $4 million. Loans cannot exceed an 80% LVR, based upon forecast R&D expenditure.
Given the program will run over two financial years, Invest Victoria will require financials and renewed cash flow forecasts prior to the commencement of FY23, and reserves the right to make adjustments to credit limits if forecasts and current financial year expenditure indicate your company will be in breach of the 80% LVR covenant.
Who is responsible for administering the R&D Cash Flow Loans Initiative?
Invest Victoria will be responsible for administering the R&D Cash Flow Loan, whilst Treasury Corporation of Victoria (TCV) will be the lender provisioning the debt finance.
Are the loans principle and interest, or interest-only?
Loans provided are via a TCV 11am facility, which is an interest-only loan, renegotiated daily. Interest payments are due on the first business day of each month.
How is the Loan to Value Ratio (LVR) calculated?
The LVR will be calculated based on forecast R&D expenditure, as expressed in your cash flow forecasts. However, if prior year refundable R&D tax offset amounts have been less than the amount claimed, the LVR will incorporate an adjustment to your LVR based upon the ratio of refund received to refund claimed.
What is the interest rate?
Is lending made in arrears?
No. Loans under the R&D Cash Flow Loans initiative are made in advance.
If I am successful in receiving an R&D Cash Flow Loan, does this provide certainty in receiving my R&D tax offset?
No. The R&D Cash Flow Loan is an initiative of the Victorian Government, whereas the R&D Tax Incentive is administered by the Commonwealth Government.
There are many conditions SMEs are required to meet in order to successfully claim the R&D Tax Incentive, and companies should seek independent R&D tax advice to ensure compliance with the R&D Tax Incentive.
Receiving a loan under the R&D Cash Flow Loans in no ways demonstrates compliance with the R&D Tax Incentive. Receiving a R&D Cash Flow Loan does not guarantee future receipt of a refundable R&D tax offset. If your R&D Tax Incentive application is rejected, or is subject to an audit by the Australian Taxation Office or any other administering body of the R&D Tax Incentive, this will constitute an event of default under your Loan Agreement and will trigger full repayment of your loan.
What if I don't receive my refundable R&D tax offset due to an ATO or AusIndustry ruling?
If you do not receive your refundable R&D tax offset, this will constitute an event of default and will trigger full repayment of your loan.
How do I find out about the Commonwealth Governments R&D Tax Incentive or my refundable tax offset?
The Victorian Government’s R&D Cash Flow Loans initiative and the Commonwealth Government’s R&D Tax Incentive are two separate unrelated programs.
Receiving a loan under the R&D Cash Flow Loans initiative in no way provides a guarantee of eligibility, or guarantee of receiving a refundable tax offset, under the Commonwealth Government’s R&D Tax Incentive.
For information about the Commonwealth Government’s R&D Tax Incentive click here.
Are the loans secured or unsecured?
Loans will be provided strictly on a secured basis only.
What do you require for security?
The Victorian Government will take security over the refundable R&D tax offset, and the designated account that will receive the R&D tax offset. The standardised form of security is to ensure the program can be administered in an efficient manner. Applicants will be required to establish a new bank account for the sole purpose of receiving refundable R&D tax offsets. Drawn funds will also be paid into this account.
Can I use the loan to pay down an existing R&D loan or other debt?
No. The Loan Agreement explicitly states this activity to be a breach of the contract.
Invest Victoria maintains the right to conduct a full audit of the company and expenditures during the loan term. If a company is found to not be spending the funds as agreed under the Loan Agreement, Invest Victoria has the legal right to call in the loan and require early prepayment.
What is the timing of drawdowns?
The Loan Agreement is limited to two draws.
The first draw must be made within 45 business days of executing the loan agreement
Once the loan is fully drawn down, the credit limit will ‘rollover’ into the second financial year of R&D expenditure subject to the loan. Borrowers must provide specific documentation throughout the life of the loan. In instances where the LVR, based on cash flow forecasts, will fall below 80%, adjustments to the credit limit will be made.
How long before I can drawdown?
The first draw must be made within 45 business days of executing the Loan Agreement. The last date for first draw will be written in the Loan Agreement.
Borrowers who fail to draw down within the first 45 business days will terminate the loan agreement.
When does interest accrue?
Interest is calculated daily and payable on the first business day of the following month.
Do I need to let you know if I sell my business or change the ownership structure of my business?
Yes. You must inform Invest Victoria if your business is sold or changes ownership structure.
How do I make the interest payments?
Borrowers will enter into a direct debit arrangement with the lender, Treasury Corporation Victoria. Interest payments, via direct debit, will be debited from a nominated account on the first business day of each month.