If there’s a field that has constantly been growing for years is research and development. Life in the science industry has been changing gradually, thanks to Research and Development businesses worldwide.
Anyone can contribute to the R&D field, although scientific ideas require massive funding to transform them into an established and successful business. Below are various ways to fund Research & Development businesses.
1. Scientific Research & Experimental Development (SR&ED)
Scientific Research & Experimental Development (SR&ED) is a program that offers financial support, tax credits, and other benefits to Research and Development businesses in Canada. Canada established the incentive program in the 1980s for organizations focused on applied, primary, support, and experimental research.
SRED is the leading way of funding Research & Development businesses in Canada after the Canada Revenue Agency’s evaluation approves them. With that, the companies never have to worry about startup capital and operational costs in the Research & Development field.
All the other options can be ideal ways to fund business Research & Development. However, before considering the other options, you should determine if your business qualifies for Scientific Research & Experimental Development. It is one of your best funding choices.
2. Go After Other Government Support Options
Not all businesses under Research & Development qualify for SR&ED due to the criteria used by the program. If yours falls under the unfortunate category, that should not be the end of your business. The government supports Research & Development businesses in many other ways, including through grants, rewards to successful organizations, or loan guarantee programs.
The good thing with government funding options such as grants is that they are never anticipated to be paid back. Additionally, they are widely available for nearly all Research & Development businesses, whether startups or established.
3. Engage Venture Capitalists
Venture capitalists are people or institutions that invest their funds (venture capital) into a business to gain shares in ownership and equity in the company. It can be an ideal way of funding a Research & Development business, especially for startups and high-risk ideas.
A venture capitalist will measure your potential in the company by inquiring about your experience in the field. They may also ask how you plan to manage the business finances, among other essential details regarding the Research & Development sector.
It would help if you prepared yourself with enough information concerning the field before approaching an investor. While you may lack full ownership and control over your business, venture capitalists provide a strong foundation for startup businesses.
4. Make Use of Crowdfunding
You can confidently fund a Research & Development business through crowdfunding which involves assembling a group of people who are ready and willing to offer financial support to your businesses.
Experts have developed various crowdfunding sites with different people who support individuals or companies towards achieving their dream Research & Development organization. If you choose to crowdfund, you must make your business initiative public to the participants and be open about your prevailing financial strengths.
You should also state the method of payment to be used by the participants for a quicker process. Crowdfunding has been successful for many Research & Development businesses, although collecting funds may take longer than anticipated.
5. Seek Support From Angel Investors
Another way you can fund a Research & Development business is by seeking support from angel investors. As the name suggests, angel investors are privileged individuals or private institutions that finance companies to gain equity or prestige (sometimes for free).
They are almost similar to venture capitalists, and only that angel investors use their net worth instead of investment funds. As a Research & Development startup seeking financial support, you should develop a reliable business plan and description that clearly states your initiative and how you intend to run the business.
An angel investor is attracted to a well-developed plan with all essential details under one file. Again, the method might limit your company ownership facilitated by substantial financial support.
6. Personal Funding
You can confidently finance a Research & Development business with your funds. It’s one of the best options, as no third parties are connected to the business. Personal funds involve finances acquired from selling one’s properties, existing savings, and profits earned from other established business operations.
As straightforward as it appears, personal funding for Research & Development business may not be the best option if you don’t have a rigid financial foundation. The startup and operational costs may be greater than what you have and thus require a boost.
7. Seek Loans From Financial Institutions
Loan funding from banks and other financial institutions has existed and benefitted many Research & Development businesses for years. It’s a slightly effortless method of funding a business due to the high number of banks and financial institutions.
After applying for a loan for your Research & Development business, the bank will examine the company against your description and ask several questions. While loan funding can help you with some startup and operational costs, it limits your control over the company and puts your assets at risk of being auctioned.