Here is another of ACF Direct’s periodic sharing of our responses to some of the questions we receive. We hope you find it useful.
Can you provide loans to help with tax bills?
Typically yes, though that, of course, is subject to the assessment of each individual case.
Is there anything different about tax loans?
Not necessarily, but it is important to keep in mind that lenders may perceive this type of funding requirement as being driven by one of two causes:
- your business remains fundamentally sound and is investigating VAT and tax loans for what might be termed “positive” reasons. Examples here might include short-term cash flow challenges pending a customer’s payment or perhaps similar because you’re investing heavily in growth and expansion;
- your business figures suggest that your enterprise is struggling to survive and simply lacks the ability to pay your tax bills today and perhaps in future too.
As you might imagine, it can be more difficult to obtain VAT and tax loans in the second case.
Please don’t draw negative conclusions though. Speak to us and let us help you analyse your position.
How does a lender know my business’ financial position?
Typically you’ll need to produce evidence in the form of audited accounts, perhaps going back 2-3 years.
If you’re operating under a business registration where audited accounts aren’t mandatory, you may need to supply evidence in the form of bank statements both for your business and your personal position.
If you’re a start-up or newer enterprise, the position becomes more complicated because the cost of your initial tax bills, in a situation where you might still be trying to gain business momentum and have limited income, should have been considered in your initial business start-up funding projections.
Some lenders might be concerned if your business is still in early development and you are struggling to cover its taxation commitments to the extent that you need to consider specific VAT and tax loans.
Is it hard to obtain tax loans?
It’s worth remembering that lenders are typically keen to advance funding and contrary to some myths, they are NOT trying to find ways to turn down requests. In fact, it’s exactly the opposite – particularly in a period when the forecasts for business taxes are forecast to fall over time.
However, it’s important to go about things in the right fashion. Not all providers offer funding for VAT and tax loans, so applying to them for help might typically prove to be a waste of time.
Let us help you with how to go about this.
What drives the loan pricing?
A number of things but perhaps most significantly, the perception of the risks involved in lending to you.
The higher the risk the lending is perceived to be, typically the higher the cost of borrowing will be – and vice-versa of course.
Will I need an exemplary credit history record?
No. Very few people can boast of a 100% glitch-free or “perfect” credit score. Lenders understand that.
Of course, any provider of funds may reserve the right to decline a VAT and tax loan application if the applicant’s credit history is particularly poor. Again though, please don’t jump to negative conclusions based upon what you might have been told by others previously – talk to us instead.
How much can I borrow?
That will typically be driven by two main factors:
- producing evidence of the tax liability concerned (most lenders will require evidence of this in the form of HMRC statements etc.);
- the position of your company or personal finance, to show the affordability of repayments status that arises from your debt and funding request.
This links back to our earlier response on company status questions and the reason you’re asking for the loan.