VAT funding is a smart financial solution designed to ease the pressure that VAT bills can place on a business’s cash flow. For many companies, especially those making large capital investments or dealing with substantial ongoing operational expenses, VAT payments can be a significant burden. These payments often need to be made before businesses can reclaim the VAT from HMRC, creating a gap that can strain financial resources.
What is VAT funding?
This is a short-term finance solution designed to cover VAT liabilities on large transactions. Rather than using working capital to pay VAT upfront, businesses can secure funding from a lender to spread the cost over a set period- usually between one to three months. Also, can take a new VAT loan every 3 months to meet the next quarters’ VAT bill. You can even finance your VAT bill up to 14 days after you have paid it, or up to 14 days after its due date. This enables businesses to manage cash flow more effectively and maintain financial flexibility without compromising day-to-day operations.
How does VAT funding work?
- Application: A business applies for VAT funding, typically requiring details of the VAT amount due and supporting documentation, such as invoices or financial statements.
- Approval and Disbursement: Once approved, the lender pays the VAT directly to HMRC on behalf of the business, ensuring timely compliance.
- Repayment: The business repays the loan in instalments, aligning with cash flow cycles and allowing time to reclaim VAT from HMRC if applicable. This structured repayment plan helps avoid cash flow issues and provides businesses with financial breathing space.
Key Benefits of VAT Funding
Protects Cash Flow
Avoids large lump-sum payments that could disrupt operations and hinder business growth.
Prevents Late Payment Penalties
Ensures timely VAT payments to HMRC, avoiding fines, interest charges and potential damage to business credit ratings.
Enhances Business Growth
Frees up working capital for investment in expansion, equipment, hiring staff or other strategic initiatives.
Flexible Terms
Typically structured around business cash flow, with short repayment periods to minimise long-term debt exposure.
Steady Cash Flow All Year Round
Reduce stress in your naturally low seasons with VAT funding helping with steady cash flow all year round.
Common Misconceptions of VAT Funding
Despite its benefits, some businesses hesitate to use VAT funding due to common misconceptions, such as:
“It’s only for large corporations”– In reality, VAT funding is accessible to businesses of all sizes,
“It’s too expensive”– While VAT funding involves interest and fees, the benefits of maintaining cash flow often outweigh the costs, especially when avoiding penalties or seizing growth opportunities.
“It’s complicated to apply”– We will guide you through the whole application process and ensure we meet your deadlines.
Is VAT Funding Right for Your Business?
If your business frequently encounters large VAT liabilities and wants to avoid tying up tax cash reserves, VAT funding can be a practical solution. It allows for better financial planning, reduces pressure on cash flow and helps businesses remain agile in a competitive market.
At Moorgate Finance we work with businesses to provide tailored VAT funding solutions that align with their needs. Whether you need assistance with a one-off VAT bill or require ongoing support, our team is here to help. Get in touch with us today to explore how VAT funding can benefit your business.
Give us a call on 01908 92 62 62 or Apply Now to start the conversation.
