Finance for research and development

R&D has an awkward cash flow shape. You pay engineers, lab time and materials for a year or more, with nothing to sell yet. The government will hand back a large share of eligible costs through the R&D Tax Incentive, but only after your income year closes, your activities are registered and your tax return is lodged.

For most small innovators, the funding question isn’t really “how do we pay for the research?” It’s “how do we survive until the refund lands?”

How the R&D Tax Incentive works

The incentive is the single biggest source of R&D funding for most Australian companies, so it shapes everything else.

• Who can claim: companies incorporated in Australia (and some foreign companies resident or operating here). Sole traders, partnerships and trusts can’t, which matters if you’re deciding how to structure a new venture.
• What it’s worth: for companies with aggregated turnover under $20 million (and not controlled by tax-exempt entities), the refundable offset is the company tax rate plus an 18.5% premium. A base rate entity at 25% gets 43.5 cents back for each eligible dollar. If the company is in tax loss, much of that comes back as cash.
• Minimum spend: eligible expenditure must be at least $20,000 for the year, unless you’ve used a registered research service provider or contributed to the Cooperative Research Centres Program.
• Registration: activities are registered with the department, and business.gov.au says applications are due 10 months after the end of the income year. The claim then goes in the company tax return.
• Processing: the department aims to process most first-time applications within 40 business days, or 20 business days for repeat applicants who register within six months of year-end. Late applications, lodged between six and ten months after year-end, have an 80-business-day target.

Business.gov.au also notes the government announced changes to the incentive in the 2026–27 Budget, starting from 1 July 2028. Until then the current rules apply.

Why registering early is a funding decision

Those processing targets have a practical consequence. A company that registers in August gets its registration back sooner, can lodge its return sooner and receives its refund sooner. One that waits until April can add months to the gap.

That gap is exactly what you’d otherwise pay a lender to bridge. Keeping contemporaneous records during the year, and having your adviser ready to register soon after 30 June, is often the cheapest R&D finance there is.

What lenders will and won’t fund

Finance	What it’s secured on	Suits	Limitations
R&D tax incentive advance	The expected refund	Companies with a solid claim history or clear eligible spend	Only a portion of the refund is advanced, and you repay even if the claim is cut
Working capital loan or line of credit	Your trading revenue	Companies with existing sales carrying an R&D program	Needs turnover; pure pre-revenue start-ups won’t qualify
Equipment finance	The equipment itself	Lab, testing or manufacturing kit with resale value	Highly specialised gear can be harder to finance
Secured business loan	Property	Founders with equity who prefer debt to selling shares	Personal property at risk on an uncertain project
Equity and grants	Ownership, or nothing	Early, high-risk research	Dilution, or matched funding and competitive rounds

The specialist R&D advance market is small, and its lenders typically look at your past claims, your adviser and how clearly your activities fit the rules. A first-time claimant with an unusual project will find it harder than a company on its third claim. Our comparison of debt and equity funding is worth reading if you’re weighing a loan against bringing in an investor.

Banks are well worth approaching if your company already has steady revenue and a relationship with one. They often provide the lowest-cost working capital, even if they won’t lend against the R&D itself.

Running R&D alongside a trading business? Tell us how the business trades and we’ll look at what fits. Sending an enquiry doesn’t involve a credit check.

The risks to price in before you borrow

• Claim adjustments. R&D eligibility is self-assessed, and the department or the ATO can review it. If eligible spend is reduced, so is the refund, but an advance still has to be repaid in full.
• Timing slippage. A late registration, an incomplete application or a query can push the refund out by months, while interest or fees keep running.
• Overestimating the claim. Not every cost counts. Some activities are excluded outright, and supporting activities have their own tests. A conservative estimate gives you a margin if a lender sizes the advance on it.
• Clawback interactions. Government grants received for the same activities can trigger a clawback that reduces the net benefit of the offset. Talk to your adviser before you assume the full offset.

Worked example: a Perth agtech company bridges the gap

An illustration only. A Perth company developing sensor hardware for broadacre farms has aggregated turnover of about $1.8m from an earlier product line and is a base rate entity. Across the year to 30 June 2026, it spends $640k on eligible R&D: engineering wages, prototype builds and field trials.

Item	Amount
Eligible R&D expenditure	$640k
Expected refundable offset (43.5%)	about $278k
Cash on hand at 30 June 2026	$95k
Planned spend July to December 2026	$310k

With a refund of about $278k due but not yet received, the company is short for the second half of 2026. It takes three steps:

1. Its adviser registers the activities in early August rather than waiting for the deadline.
2. A specialist lender advances part of the expected refund in September, to be repaid directly from the refund.
3. A $60k line of credit, approved on the existing product line’s revenue, covers the remaining gap and any delay in processing.

When the refund lands, the advance is cleared and the line is paid back down, leaving the facility open for next year’s cycle.

Funding the next stage of your R&D

Research is a long game, and the companies that keep going are usually the ones that plan the cash as carefully as the science. Bring your last claim (if you’ve made one), your current-year spend and a picture of the trading side of the business, and you’ll be ready for a useful conversation.

Our enquiry form takes roughly a minute to fill in, and doing so won’t leave a mark on your credit file. We read every enquiry ourselves instead of forwarding it to a long list of lenders, and someone from our team will call to talk it through. The more accurate your turnover and R&D figures, the quicker we can point you to something workable.

Ask about funding my R&D →