August 12, 2022

How Can Tax Funding Help With a Business’s Cash flow?

Sometimes businesses find themselves in situations where cash flow is tight. Perhaps due to unforeseen circumstances. Having just come through a pandemic, the majority of us have a glimpse into a world of the unexpected. These events as we have seen can sometimes be totally beyond our control, but it will have a quick and adverse affect on the business.

Cashflow shortages may also be caused by a number of other reasons. Sales falling through or not completing within expected time frames, non-payment by debtors, increasing prices / costs within the business. The latter is something that we are seeing more and more of in the current climate of higher costs of living and inflation. 

If you work within or run a business that is currently suffering cashflow shortages, it can be a challenging time. Business owners will have great amount of stress dealing with large Tax payments for VAT or corporation tax to name but a few. 

By obtaining a Tax Funding loan, it is possible to borrow funds to make these payments.

Additional Considerations

  • It is important however to approach HMRC and see if they will agree a Time to Pay proposal so you don’t run up any interest costs.
  • If this is not possible, find a lender in the marketplace that will be able to lend the business funds during these cashflow shortfalls. 
  • Stay on top of any potential debtors, as these funds could help alleviate these cashflow shortfalls without further expenditure by the business. 

Throughout this process, it is important to stay in touch with HMRC and keep them up to date with the situation and your intention to pay. 

Tax Funding Lenders

There are a number of lenders that will provide a range of different facilities to enable a business to make tax payments. Lenders will want to assure themselves of affordability and repayment of their lending, however they still may be able to provide funding for these eventualities. 

There are several different lenders out there who may structure the loan by way of offering a short term business loan to longer-term facilities. In certain circumstances, a company overdraft may be sufficient to ensure there is enough funding available. 

Whatever the requirement please research your options thoroughly to ensure that you have the most appropriate facility for your business, and are not using facilities that may be expensive. There may be cheaper solutions for you in the marketplace.

How to Avoid Having to Borrow for Tax Bills 

There are some strategies which may be helpful to avoid having to borrow for up and coming tax bills.

As corporation tax is payable on an annual basis it is important to try and put some money to one side on a monthly basis to ensure that the payment can be made.

PAYE may also be difficult at certain times of the year. If your business is seasonal and if savings haven’t been possible, these shortages could be funded during these months via various business loan propositions. 

The Provide platform connects you with over 200 lenders who specialise in a wealth of finance products. Whether or not tax funding is right for your business, Provide will help you find the perfect finance solution for your finance needs.

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