VAT Finance & VAT Loans for UK Businesses

Pay the VAT bill. Keep the cash in your business.

A large VAT payment can take a significant amount of cash out of a business in one go, even when the business is profitable and has the money available.

VAT finance allows businesses to fund an upcoming VAT liability and spread the cost over a short repayment period, helping preserve working capital for stock, wages, investment, expansion and day-to-day running costs.

Fifty Nine Financial is an independent commercial finance broker helping businesses throughout the UK arrange short-term funding for VAT and other business finance requirements.

Speak to us about VAT finance – 01332 985528

What is VAT finance?

VAT finance is a short-term business loan used to fund a VAT liability.

Rather than paying the entire VAT bill from existing cash reserves, a business can use external finance to meet the liability and repay the borrowing over an agreed period.

VAT finance is typically arranged over a short repayment period, often around 3 months. Where affordability is tighter, a longer period, such as 6 months, may sometimes be considered, subject to lender assessment.

The amount available, repayment term and interest rate will depend on the circumstances of the business and the lender selected.

Why finance a VAT bill if you already have the cash?

You don’t necessarily need to be struggling to pay your VAT bill for VAT finance to make sense.

Consider a business with a £50,000 VAT liability and £100,000 available in the bank.

It could pay HMRC immediately from its own funds, but doing so would remove half of its available cash in one payment.

That money might also be needed to purchase stock, meet payroll, fund a new contract, invest in equipment or simply maintain a sensible working-capital buffer.

VAT finance provides another option: meet the VAT liability while spreading its impact on business cash flow.

Whether borrowing is appropriate will depend on the cost of the finance, the financial position of the business and what else the available cash could be used for.

How does VAT finance work?

The process is generally straightforward.

1. Tell us about your VAT liability. We’ll discuss the amount due, the payment deadline and the circumstances of your business.

2. We assess your funding options. We’ll consider suitable lenders, repayment terms and affordability.

3. Review the proposed facility. You’ll receive details of the borrowing, including the interest rate, repayments, charges and any security requirements.

4. Funding is arranged. Once approved and completed, the funds can be used to meet the VAT liability in accordance with the lender’s terms.

5. Repay over the agreed period. Repayments are made according to the loan agreement, with early repayment potentially available.

How long can I spread my VAT bill over?

VAT finance is commonly structured over 3 months, allowing businesses to spread a significant VAT liability across a short repayment period.

Where repayments over 3 months would place too much pressure on cash flow, some lenders may consider extending the term, for example to 6 months, subject to affordability and lender assessment.

Some lenders also allow early repayment, which can be useful if cash flow improves sooner than expected.

We’ll explain the available repayment options and help you consider a term appropriate for your business.

Why do businesses use VAT finance?

VAT finance isn’t simply for businesses that cannot afford to pay HMRC.

Businesses may choose to preserve cash for a variety of reasons, including:

• Purchasing additional stock or materials

• Meeting payroll and other operating costs

• Investing in equipment

• Funding a new contract

• Expanding into new premises

• Managing delays in customer payments

• Maintaining a healthy working-capital reserve

For some businesses, retaining cash within the company may be worth the cost of short-term borrowing. For others, paying the VAT bill directly may be more appropriate.

How quickly can VAT finance be arranged?

Some lenders can assess straightforward applications quickly, particularly where the required financial information is readily available.

However, timescales depend on the lender, the business and the complexity of the application.

We recommend considering VAT finance before the VAT payment deadline, rather than waiting until the liability becomes overdue.

What information will I need?

Lenders will typically want to understand the financial position of the business and its ability to meet the proposed repayments.

Depending on the lender, this may include:

• Accounts for the most recent year

• 3 months business bank statements 

• Details of existing borrowing the business has

• The amount of the VAT liability

• Information about the business and its directors

We’ll explain what’s required once we’ve discussed your circumstances.

Can VAT finance be repaid early?

Yes. Some short-term business lenders allow early repayment, which can be particularly useful for VAT funding.

For example, a business might initially arrange borrowing over several months but subsequently receive a large customer payment and decide to repay the outstanding balance sooner.

Early repayment may reduce the overall interest payable, depending on how the lender calculates interest and the terms of the agreement.

We’ll explain any early repayment provisions before you proceed.

VAT finance for accountants and their clients

We regularly work alongside accountants and other professional advisers whose clients require commercial finance.

VAT funding can be particularly useful to discuss ahead of a client’s VAT payment deadline, allowing the business to consider whether it would prefer to pay entirely from cash reserves or preserve some of that working capital.

If you’re an accountant with a client facing a significant VAT liability, we’re happy to discuss the circumstances with you or speak directly with your client.

Discuss a client’s VAT funding requirements – 01332 985528

Why arrange VAT finance through Fifty Nine Financial?

Fifty Nine Financial is an independent commercial finance broker rather than a single lender.

Our role is to understand your business, the amount required and the reason for borrowing before considering appropriate funding options.

We can also look beyond the immediate VAT payment. If the liability forms part of a wider working-capital requirement, another solution, such as an unsecured business loan or invoice finance facility, may be more appropriate.

The objective isn’t simply to arrange a VAT loan. It’s to identify a sensible funding solution for your business.

Frequently asked questions about VAT finance