VAT Loans

Written by Simon Moorcroft | Reviewed by Richard Wilcock | Updated: October 15, 2024

Table of contents

• What is a VAT loan?
• How does a VAT loan work?
• Benefits of applying for a VAT loan
• Do I qualify for a VAT loan?
• Is a VAT bridging loan the same as a VAT loan?
• Why choose Capalona to arrange your VAT finance?

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If you’re VAT registered, paying VAT is unavoidable. Whether you pay it annually, quarterly or monthly, it’s a bill that can immediately wipe out your cash reserves, putting you in a tricky financial situation.

If you want to spread your VAT bill payments over months or years, you can apply for a business VAT loan. Learn more about them below.

What is a VAT loan?

A VAT loan is a business loan to help you meet your VAT tax obligations on time. The lender can approve funds in as little as 24-48 hours, so you can quickly pay HMRC to avoid late fees and other penalties. These loans can be short-term (up to three months) or slightly longer-term (sometimes 12 months+).

How does a VAT loan work?

Loans to pay VAT are much like any other loan. You apply for the loan with a trusted lender, and they assess your application. If you’re eligible, they can approve funds quickly. You can then use these funds to pay HMRC directly, or some lenders will pay HMRC on your behalf. You’ll repay the lender usually in regular instalments until the debt is repaid in full.

You can apply for it to cover either part or all of your VAT bill. This gives you breathing space and peace of mind that the bill is covered on time without depleting your working capital reserves in one go.

Benefits of applying for a VAT loan

• Improve your cash flow. The overarching benefit of applying for VAT finance is improving your cash flow. By not having to pay out of your own funds, you can spread the repayment cost over months. These predictable monthly repayments help you better manage your business finances.
• Pay your VAT tax bill on time. No one welcomes HMRC fines or penalties, so paying your tax bill is essential. Tax finance means your tax bill is paid on time every time; you can even use it to pay any outstanding tax debt.
• Free up your working capital. By applying for a VAT bill loan and spreading payments, you can enjoy healthier cash reserves each month and invest in your business to drive growth.
• Almost immediate access to funds. If you apply for an unsecured VAT loan, you can have funds in your business bank account in a matter of hours, making this financial solution flexible to your business needs.
• Direct payments to HMRC. Some VAT loan lenders will pay HMRC directly, saving you a job. You’ll repay them per your loan agreement until the amount is repaid in full.

Do I qualify for a VAT loan?

To qualify for a VAT loan, your UK business must be VAT-registered and have a trading history of at least 12 months. Lenders tailor VAT loans to suit individual business needs, so to speed up your loan application, you can prepare the following documents:

• VAT return
• Business bank account statements
• Company accounts
• Additional information about the business directors

Is a VAT bridging loan the same as a VAT loan?

No, a VAT bridging loan is different from a standard VAT loan. A VAT bridging loan bridges the financial gap for property developers when they purchase a property but don’t have the upfront funds to pay the 20% VAT.

Commercial property can be expensive, so the VAT bill can be pretty big, too. The VAT bridging loan means they can complete the purchase without worrying about available funds.

Why choose Capalona to arrange your VAT finance?

Running your business can be stressful; with so many things to remember, forgetting to pay your VAT bill could easily be forgotten. However, continued late payment of business taxes will result in accrued interest charges and, eventually, a petition for compulsory closure. But you can avoid all this with a VAT loan.

We’re one of the largest business finance brokers working with various lenders specialising in VAT and tax finance. So, we’re in the best position to help your business find and secure the right business funding well before HMRC’s payments are due.

• Authorised and regulated by the Financial Conduct Authority (FCA)
• Free to use, we don’t charge any fees for our service
• Compare and access a range of reputable VAT loan providers
• Members of the National Association of Commercial Finance Brokers (NACFB)

Start comparing VAT loans.

About the author

Written by Simon Moorcroft

Money Writer, Director and Co-Founder

Simon has over twelve years of experience in consumer and business finance. Simon is a Co-Founder and Director at Capalona and heads up the technology team, who utilises the latest technology to assist our customers in finding fast finance.

Updated: October 15, 2024
Published: October 02, 2024