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What is the R&D Cash Flow Loan?
The R&D Cash Flow Loans will provide low-interest loans to eligible Victorian SMEs that are claimants of the R&D Tax Incentive.
Funding
The Victorian Budget 2020-21 provides up to $50 million in low-interest loans to innovative Victorian small-medium enterprises (SMEs). It will provide loans valued between $250,000 and $4 million. 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.
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.
Loans will be provided strictly on a secured basis only.
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.
Timing
The R&D Cash Flow Loans Initiative is a short-term initiative with all loans to be repaid in full by 31 October 2023.
A 3 week turn-around on loan applications and outcome/letter of offer.
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.
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Objective
The R&D Cash Flow Loans ensures SMEs can continue to invest in research and development to keep their businesses competitive; employing more researchers and innovators, conducting trials and experiments and purchasing assets and equipment critical to R&D work programs.
It also seeks to support and grow Victoria’s innovation ecosystem and recognises the importance of investments in research and development to the future growth and sustainability of the Victorian economy.
What is the interest rate?
The agreement between the Borrower and TCV provides for an 11am loan facility. The interest rate on the TCV 11am loan facility is variable and is determined with reference to the Reserve Bank of Australia’s target cash rate and TCV’s client lending fees. Currently (29 April 2021), TCV’s 11am loan interest rate is 0.265% (per annum).
Please note, that as a variable interest rate it is subject to change. It is recommended that Borrowers monitor changes in the RBA target cash rate. Any changes to TCV’s client lending fees over the life of the TCV 11am loan facility will be communicated to Borrowers.
Interest is calculated daily and payable on the first business day of the following month.
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.
Eligible Companies
The R&D Cash Flow Loans will support innovative Victorian SMEs in developing the products, services and technologies vital to Victoria’s future economy that:
- does not engage in prohibited activities
- is prepared to enter into a standardised TCV Loan Agreement with non-negotiable terms and conditions in the TCV Loan Agreement
- has previously received the Commonwealth Government’s R&D Tax Incentive refund
- will be eligible to be a recipient for future refunds based on forecast R&D activities
Eligible Activities
Businesses that can demonstrate compelling potential for R&D in Victoria, meeting at least two of the following scenarios, may be granted loans:
- expected to lead to meaningful growth in R&D in Victoria
- expected to lead to meaningful job creation in Victoria
- expected to fund meaningful expansion of R&D operations into Victoria
- headquartered in Victoria
For these purposes growth, job creation and expansion can be regarded as “meaningful” if they are significant in the context of:
- the R&D activities of the business
- the R&D market/industry
- R&D activities in the geographical area or region of Victoria in which the business operates or directs its R&D activities
- jobs that are permanent, full time, provide good prospects for advancement or training, are to be regarded as of greater significance than jobs that are temporary, part time, have poor prospects for advancement or training
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.
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R&D Tax Agent
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.
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More Information
Latest News
Digital health company TALi Digital (ASX:TD1), has just received a major boost to its commercialisation efforts, after being granted a $500k R&D funding facility by the Victorian government today.
The facility was approved by the Treasury Corporation of Victoria as part of the Victorian Government’s R&D loan initiative administered by Invest Victoria.
TALi receives the $500k funds in two tranches, with the first tranche of $300,000 already received and the second one of up to $203,744 received by the end of March 2022. The funds will be used to support the company’s commercialisation activities, including the one related to its recently signed agreement with US-based Akili.
TALi is a digital health company that delivers diagnostic and therapeutic solutions to enhance cognitive function and behaviour. It has developed a patented platform technology targeting cognitive attention skills during early childhood, and has had success in treating ADHD and related conditions through DTx products.
AdAlta Ltd (ASX:1AD) has received a further $1.6 million under the Victorian Government’s research and development cash flow loan initiative. The funds will further extend the company’s cash runway and be used to further progress the development of an inhaled form of lead product AD-214 for use in clinical trials in idiopathic pulmonary fibrosis patients.
AdAlta is set to pocket a $4 million low-interest loan from the investment arm of the Victorian State Government. The funding comes as part of Invest Victoria’s Research and Development (R&D) Cash Flow Loan initiative.
AdAlta will receive the $4 million loan in two tranches, with $2.4 million to be paid before the end of September and the rest in the March quarter of 2022. AdAlta shares closed 6.38 per cent higher this afternoon.
Earth Resources Regulation has flagged that mining, equipment, technology and services (METS) companies can receive funding from the Victorian Government’s research and development (R&D) cash flow loans initiative.
The initiative will provide successful applicants with between $250,000 and $4 million in low-interest loans for small to medium enterprises (SMEs) for a period between 12-28 months.
“It can assist Victoria’s vibrant and pioneering METS sector to continue developing new products, services and technologies that could address some of the mining and resources sector’s greatest challenges,” Earth Resources Regulation stated.
METS companies have expertise across areas including engineering consulting, construction, information technology and professional services.
Invest Victoria is implementing a low-interest loan scheme for Victorian SMEs across all industries to provide cash flow support for innovation activity in Victoria. This scheme will further position Victoria as a leader in Australia’s R&D ecosystem.
Join Invest Victoria’s Rebecca Bailey, Director of Investment – Innovation & Partnerships to hear a brief introduction of the program, details of guidelines and eligibility requirements.
May 26, 2021 04:00 PM in Canberra, Melbourne, Sydney
