Startups turn to R&D rebate loans to counter capital crunch

Fintech lenders say they are seeing a surge in businesses wanting to take out loans against expected research and development tax incentive refunds, despite tax experts warning of the risks involved.

Billions of dollars of research and development claims are made each year, with startups eligible for a rebate on spending for activities that contribute to genuinely new product development and learning.

A niche cohort of lenders that offer startups an advance on these refunds has emerged in recent years and one such company, Radium Capital, said business is booming amid the coronavirus pandemic.

“Businesses are trying to get capital certainty from us in these uncertain times,” Radium chief executive Cameron Owens said.

The business, which has loaned more than $325 million to Australian companies, advances cash to borrowers based on their anticipated refunds at 15 per cent interest and with a $699 set-up fee.

Mr Owens said the business had seen a 100 per cent increase in lending activity between March and April and that it was about to close out its strongest month ever.

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Source: Coronavirus Australia: Startups turn to R&D rebate loans to counter capital crunch