If you’re running a business, cash flow isn’t always plain sailing: there may be seasonal fluctuations in your income, clients may be late paying invoices, or there may be important business investments to bankroll. By not paying your VAT liability on time, you generally face a financial penalty. The solution? A VAT loan is a simple way to free up funding when you need it, offering the finance you need to make your quarterly HMRC VAT payments on time. This ensures that you are not entering into an official payment arrangement plan with HMRC which can be a risk to the business, much more prudent to take a VAT loan through a 3rd party to ensure that you are never in the position where you can’t make a repayment to HMRC.
What is a VAT loan?
A VAT loan is a 3-month, unsecured business loan that can be used to meet your quarterly VAT liability if you have a temporary cash flow shortfall.
Once you have been accepted for a VAT loan, we can organise payment to HMRC direct, or to your business account. Then, all you need to do is make your VAT loan repayments in manageable monthly instalments. Your first payment will start 30 days later meaning that you have instantly gained 30 days cash flow before the first third of the loan is due.
Is my business eligible for a VAT loan?
VAT funding through Acorn is open to businesses that meet the following criteria:
- VAT registered
- Turnover of more than £500,000
- Based in the UK
- Trading for more than 2 years
Businesses eligible for a VAT loan are usually limited companies, although VAT loans can also be paid to partnerships, LLPs and sole traders.
Is VAT finance the best option for my business?
A VAT loan is one way to get help paying your VAT bill. It may be suitable for your business if either of the following apply to you:
- seasonal fluctuations in your income mean you don’t have the cash flow to pay your VAT bill when it’s due
- you need to keep hold of your available funds in order to facilitate other business expenses
VAT loan advantages
There are several advantages to taking out a business VAT loan to pay your quarterly tax bill.
- Your loan can be paid directly to HMRC if required, thus minimising administrative work on your part and ensuring that you avoid any late payment penalties
- Spread the cost of your VAT payments over a 3-month period with the ability to revolve the facility as many times as you wish; this effectively turns a quarterly liability into a monthly one
- Use the money you would have spent on your VAT bill, to finance other business investments
As a form of short-term finance, many firms find the cost of credit on a VAT loan palatable as the interest is only over 3 months and the business also claims tax relief on the interest element of the loan. Acorn Business Finance are specialists in VAT funding so we will always get your VAT loan approved with the best suited and most cost-effective lender for your specific business.
Can a VAT loan help with the cost of other HMRC expenses?
- Income tax
- Corporation tax
- Capital Gains tax
- PAYE and NI for employees
In addition to VAT funding, the above liabilities can also be funded over a 3-12 month period should you wish to look at this, or you could consider other forms of business finance for longer term borrowing for other business requirements.
Are there any alternatives to a VAT loan?
A VAT loan isn’t the only way to make your HMRC VAT payment on time. Other options could include:
- business credit cards
- invoice finance
- other types of business loan
- Whilst we would always advise this as a last resort, asking HMRC for support, through Time To Pay arrangement
How Acorn can help
Here at Acorn Business Finance, we’re a directly authorised independent finance broker specialising in business loans for small and medium sized enterprises. We understand the needs of SMEs, and we have the industry know-how to achieve an acceptance for your business at the best price, whatever your sector.
If you’re wondering whether a VAT loan is right for you, we can help.
- As an independently owned business finance broker, we pride ourselves on our personalised approach. When you contact us we’ll take the time to understand your business needs, and outline the most cost-effective options for your circumstances
- With a comprehensive and long established selection of lenders at our disposal, we guarantee to find the best loan terms for your business
- Unlike high-street banks, we offer flexible, bespoke finance solutions in a timely manner
Contact us
If you have any questions about VAT loans and how to apply, don’t hesitate to contact us.
- Call us on 01242 395507
- Fill in our contact form
- Book a callback at your convenience
Or read more about the other business loans we offer
