If your company needs financial help to pay your tax or VAT bills, you may be wondering if you can take out a business loan for this purpose.
The quick answer is yes, you can use finance to help with tax or VAT bills. One option is to take out a specific type of business loan known as a VAT loan or tax loan. That’s what we’ll discuss in this article.
Business finance products such as VAT loans and tax loans are designed to ease the pressure of paying large sums to His Majesty’s Revenue and Customs (HMRC). Depending on your company’s situation, this could help maintain steady cash flow throughout the year.
For some companies, cash flow can be seasonal. Business growth can also fluctuate. Being able to meet VAT or tax deadlines may be challenging in these instances, when cash is tied up elsewhere.
By using finance to cover these liabilities, you may be able to afford your company more breathing space and prevent strain on working capital.
How it works
VAT and tax loans are straightforward and will usually be tailored around your HMRC obligations.
The process begins with a lender providing a loan to cover your tax or VAT bill. This means you don’t have to use your own funds to make the payment. You won’t settle the amount with HMRC directly – the lender will pay it on your behalf. The lender will pay the amount on time, avoiding any risk of penalties or late fees.
Once the VAT or tax payment has been made, it is then your responsibility to repay the lender through fixed monthly instalments over an agreed term.
At AJL Finance, we offer VAT finance over a three-month period, which aligns with a business’s quarterly VAT cycle. Tax finance is more flexible, with repayment terms available over three, six, ten or twelve months; depending on your cash flow needs.
Using VAT and tax loans at the right time can help to avoid a large and potentially disruptive one-off payment, giving you predictable monthly costs. The result is that you can maintain working capital for day-to-day operations and keep your business on track.
