Paying VAT can put pressure on a business's cash flow, especially when it falls at a time when other financial priorities are competing for attention. Whether it's payroll, stock purchases or investment in growth, large one-off VAT payments can disrupt your plans.
VAT funding offers a smart alternative - allowing you to spread the cost over a few months, so you can stay on top of your commitments without draining your resources.
What is VAT Funding?
VAT funding is a short-term financing option that helps businesses pay their VAT bill in manageable monthly instalments, typically over a three-month period. Rather than making a single large payment to HMRC, you take out a loan to cover the VAT amount, then repay the loan in agreed stages.
This approach offers greater flexibility and ensures that your cash flow remains stable, even during demanding financial periods.
Why Businesses Use VAT Funding
There are several reasons why businesses choose to fund their VAT:
- Improved cash flow
By spreading the cost, you avoid large, sudden outgoings that can affect your ability to operate or invest in other areas of the business.
- Avoiding penalties
Late payment of VAT can lead to penalties and interest charges. Funding ensures you meet deadlines, even if cash is tight at the time.
- Simplicity and speed
Many funding platforms offer a straightforward quote process. You'll typically just need your company registration number and the VAT amount due to receive an estimate.
- Clear repayment terms
Most VAT funding products come with fixed monthly repayments, making it easier to budget and plan ahead.
Who Can Benefit?
VAT funding is suitable for a wide range of businesses, from start-ups to established SMEs. It can be particularly helpful if:
- Your business is experiencing rapid growth and reinvesting profits
- You face seasonal fluctuations in income
- You've received an unexpectedly high VAT bill
- You want to hold onto more working capital for flexibility
It's not about avoiding tax obligations – it's about managing them in a way that supports the wider health of your business.
How HMB Accountants Can Help
At HMB, we work with small businesses across the Tees Valley to help them understand and access VAT funding options. If your business is under pressure from a looming VAT deadline, or you simply want to improve how you manage your tax liabilities, we can help.
We'll explain how the process works, help you assess whether funding is a good fit and, where appropriate, assist you in obtaining quotes or liaising with providers.
In Summary
VAT funding is a valuable tool for businesses seeking to remain compliant without compromising their financial stability. It offers the flexibility to pay HMRC on time while keeping working capital available for other priorities.
If you'd like to learn more or discuss how VAT funding could work for your business, start here with our vat calculator https://swoopfunding.com/vat-calculator/?utm_source=hmbaccountants