A VAT loan is used to pay the quarterly or annual VAT payment to HMRC. Businesses typically use a VAT loan to avoid penalties during periods of slow cashflow, (such as seasonal demand), or if they wish to hold on to their available cash for longer, (such as to invest in the business with a major purchase).
VAT loans are available from as low as £10,000, up to a maximum of £2.5 million. The sum you can borrow will depend on the unique circumstances of your business and your eligibility. Business Finance Expert makes every effort to ensure applicants receive the funds they need. Even if you’ve been rejected elsewhere, we may still have a VAT loan to suit your situation. Contact us today to discuss your requirements.
Don’t get caught with hefty penalties and surcharges by paying your VAT bill late. Contact Business Finance Expert to secure the VAT loan you need. Pay your tax on time, ease your cashflow, use your extra money to grow your business.
A business applies to a lender for a VAT loan. If successful, the lender pays the borrowed sum directly to HMRC to pay the outstanding VAT. The business pays the lender back in monthly instalments, which are tailored to suit the business and can be spread across a period of 3, 6, 9 or 12 months.
VAT is usually paid quarterly, and loans are usually granted one quarter at a time. However, where a borrower in good standing has an open loan, but they find they need to borrow funds for an additional VAT quarter, it may be possible for additional lending to be secured.
Interest rates for VAT loans are typically higher than other forms of business loans and they can vary depending on the borrower’s criteria and general market rates. Typical interest rates for borrowers with good eligibility across a 3-month loan duration is currently as low as 3%.
A VAT bridging loan is used to pay VAT that may be due on the purchase of a commercial property. The rules on VAT liability on business real estate are complicated and it is not unusual for the need to pay this tax to become known only during the later stages of the transaction. Due to the large sums involved, this unforeseen burden may cause significant extra costs to be incurred, or even cause the sale to abort.
A VAT bridging loan can negate this thorny problem and ensure the transaction completes.
No. VAT loans are specifically designed to pay outstanding VAT. However, there are other loan products available for the payment of different taxes. Contact us to discuss your options.
As well as standard credit checks and a review of the business’ financial situation, other eligibility criteria will apply. They include:
Many types of business are eligible for a VAT loan – manufacturing, consulting, professional services, agricultural, construction, etc. Contact us today to confidentially discuss your borrowing needs and the eligibility of your business.
VAT loans are always paid directly to HMRC. This ensures that you meet the legal requirements of being VAT registered and that you avoid late payment penalties. A VAT loan can also smooth out your cashflow.
Instead of paying one large quarterly bill, the payment can be spread across monthly instalments for up to one year – (although there will be interest to pay on the loan). Funds freed up by using a VAT loan can be invested into other areas of your business. Additionally, VAT loans do not use existing banking or credit facilities and they may be arranged as ‘rolling’ or drawdown borrowing, (subject to eligibility).
This arrangement allows the borrower to use loan funds on a fluctuating basis, much like an overdraft.
Because they are short-term, VAT loans can be more expensive than other forms of business borrowing.
Depending on how quickly you need the funds, business owners should consider the cost of this type of finance compared to other lending options.