VAT (Value Added Tax) is a type of tax added to the price of products and services. The amount of VAT added depends on the product, its overall value and the production process. Businesses are obliged to collect VAT on behalf of HMRC and pay this on a quarterly basis, in the majority of cases.
A VAT loan, therefore, is a funding option you can take if you need support in paying this specific type of tax. Discover more about VAT loans here.
What are VAT Loans?
Once you have secured a lender for a VAT loan, they will pay the tax you owe to HMRC upfront. You can then begin to make monthly repayments to the lender, helping you to break the funds you owe into more manageable chunks. Having a VAT loan can also mean you avoid any penalties for late tax payments, giving you a little more freedom with your cash flow.
Who can take out a VAT loan?
Of course, you must be VAT registered to be able to take out a VAT loan. You will be required to pay VAT if your business had a VAT taxable turnover of more than £85,000 over the last 12 months, and if this is the case, you will need to register yourself.
You are most likely to get a VAT loan if your business is based in the UK and is a limited company. In some cases you must also have a trading history of more than 12 months. At Aurora Capital, we have access to a large suite of lenders who may be able to accept businesses for VAT loans who do not meet standard criteria. Please get in touch directly for more personalised support.
Are VAT loans worth it?
VAT loans are short term and can therefore be more expensive than other loans that enable flexibility with cash flow. With that said, whether or not VAT loans are worth taking out largely depends on the speed at which you need access to the funds and whether you can afford to repay the fees later down the line.
One of the primary benefits of a VAT loan is that you can avoid government penalties for late payments. Plus, you can use the funds freed up by the loan for other areas of your business, for example to expand your staff network or purchase new equipment.
VAT Loans at Aurora Capital
If you think it might be worth applying for a VAT loan to support your business and its cash flow needs, you can apply today. Our clever platform will match you with an appropriate lender, and we’ll help you get the ball rolling from there.
Visit our Knowledge Hub for more information about VAT loans, how to apply and more!
