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What are VAT loans?
Is your company eligible for a VAT loan
VAT is a mandatory tax collected by businesses with an annual taxable turnover of £90,000 or more in a rolling 12-month period VAT is a mandatory tax collected by businesses with an annual taxable turnover of £90,000 or more in a rolling 12-month period. It’s collected on behalf of HMRC and the tax body is quick to take enforcement action against businesses that don’t pay on time.
They charge onerous financial penalties and interest for late or non-payment and if money hasn’t already been allocated to pay a bill it can be difficult for a business to find sufficient funds.
This is when VAT loans, and other loans for HMRC taxes, can help. They’re a short-term form of borrowing that keeps you on track with your tax obligations and helps to avoid the oppressive enforcement procedures commonly undertaken by HMRC.
What is a VAT loan?
VAT loans are generally unsecured loans so you don’t need an asset as collateral, although some lenders may ask you for a personal guarantee. A VAT loan spreads the cost of your VAT bill over a fixed term, which is typically between three and 18 months.
Funding of around £5,000 to £250,000 may be available and is paid directly by the lender to HMRC. You then repay the financier over the agreed term in affordable fixed monthly instalments.
In what circumstances might you need a VAT loan?
Securing a VAT loan might form part of a strategic plan to preserve your business capital for use on other projects or investments. The funding also provides invaluable support if you’re experiencing poor cash flow.
Additionally, VAT loans can help businesses manage seasonality issues and smooth out cash flow through the year. They provide a sustainable way to meet your tax liabilities and retain a positive relationship with HMRC.
Eligibility for HMRC VAT loans
VAT loans are available for limited companies, sole traders, and partnerships in all industries. You may be eligible if:
- You’re VAT-registered
- Your annual turnover exceeds £85,000
- Your business passes the credit checks and affordability checks carried out by lenders
You’ll need to provide documentation in support of a VAT loan application, including sales and cash flow forecasts, historical financial information and your plans for the future. This reassures lenders that you can afford the loan for the full term and don’t pose a high risk of default.
Advantages of VAT loans and how to apply
The benefits of securing funding for VAT include:
- Spreading the cost of your VAT bill
- Protecting working capital availability
- Maintaining a positive relationship with HMRC
- Avoiding hefty financial penalties and charges for late or non-payment
UK Business Finance can help you find the best deals on VAT loans based on your business’s needs. We’ll scour the whole of the market and identify the best interest rates, loan terms, and lenders’ fees, whilst also taking note of any other borrowing requirements you might have.
Our team provides support throughout the process and can make an application on your behalf if necessary. We’re a reliable independent commercial finance broker so please get in touch with one of the team for more information.
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Matt Cluer
Finance Expert
Matthew has over 15 years’ experience of working alongside businesses across the UK supporting directors, shareholders, and key stakeholders. At UKBF Matthew works tirelessly to secure the funding companies need when they need it. Adept at raising finance through invoice and asset-based lending, crowdfunding, loan and equity funds as well as Government schemes, Matthew is perfectly placed to help your business access the funding required whether for general working capital, or to embark upon an ambitious growth and expansion project.
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What happens if I default on a business loan?
Defaulting on a business loan typically involves missing several payments or consistently paying late
What are VAT loans?
VAT loans are a form of short-term borrowing which is paid directly to HMRC, which allows you to repay the lender over a series of affordable instalments.
What are my options if I need business finance urgently?
Regardless of how closely you monitor your company’s cash flow, the nature of business means you may still need finance urgently at some point.
What is equity finance?
Equity finance is a business funding option that involves selling shares in return for investment. It’s commonly used by start-ups or early-stage company directors wishing to get their businesses off the ground and propelled towards rapid growth.