Can I get an SR&ED loan if we prepared our claim in-house?

Declined. A stable Canadian software company came to us with an aggressive, internally prepared SR&ED claim, and we couldn't rely on it to survive a CRA review. A lender won't dig deep to prove a weak-looking claim is fine. If your claim is the collateral, it has to look fundable on its face.

The situation

A growth-stage software company, operating for well over five years, asked us to finance its accrued SR&ED claim, with an expected refundable credit in the $150,000 to $250,000 range. A lot looked right. Revenue was stable. They had recently cut costs. They carried between $1.5M and $2.5M of BDC debt, a COVID-era loan on favourable terms. Their SR&ED filing history was clean.

The claim was prepared internally and filed by their accountants.

How we looked at it

The BDC loan wasn't the issue. It was patient, well-priced debt, and we're used to sitting alongside BDC under an intercreditor agreement.

The issue was the asset. When we lend against SR&ED, the claim is the collateral. So the question is simple: if CRA reviews this claim, how much of it survives?

Three things worried us.

The claim was shrinking. They had reduced staff, so the accrued claim was going down.

The wrong people were in it. The claim included management and operations staff without a software development background. CRA often doesn't look fondly on that.

The labour share was very high. Over 80% of all labour costs were claimed. For a company operating that long, that's a lot. Mature software companies have sales, support, finance and admin people, and most of them aren't doing experimental development.

None of that proves the claim was wrong. It might have come through a review intact. But here's what founders don't see: a lender is very unlikely to go to the effort of finding out. That would mean rebuilding the technical case ourselves, project by project and person by person. If a claim looks weak, we don't dig. We pass.

Internal preparation isn't the problem on its own. If you have real in-house expertise and CRA has reviewed your claim within the last three years, that history does the work for you. This company had a clean record, but no recent review to show its approach held up.

The downside matters for the borrower too. If CRA reduces a claim after we've advanced, the loan doesn't shrink with it. And a review takes time: CRA generally processes a refundable claim under review within 180 calendar days (CRA: After you claim, as of 2026).

The decision

Declined. Not because of the debt, the revenue or the cost cuts, but because we couldn't rely on the asset.

Our advances typically range from 70% to 100% of the expected refundable credit, and the gap below 100% is a cushion against CRA adjustments. A cushion handles normal adjustments. It can't cover a claim where a large share is open to challenge.

What to do instead

1. Get the claim built or reviewed by an experienced SR&ED preparer before you rely on it for financing, unless you have proven in-house expertise and a CRA review in the last three years.
2. Be conservative about who's in the claim. Include people doing eligible work. Leave management and operations out unless their work genuinely qualifies.
3. Keep evidence of the work and the time. Document the technical work, and keep records of the hours each person spent on SR&ED projects, so you can justify every name and every hour if CRA asks.