Can I get a loan to pay tax debt?

As a finance broker supporting business owners I’ve developed the habit of reading blogs from professional services companies, lenders, financial planners and the like. It’s a great way to develop broader knowledge and often provides me a new way to look at things. 

Recently I was reading through a liquidator’s blog about a business owner’s options when faced with an ATO debt. One of the first things they espoused was that business owners are unlikely to be able to obtain a loan to payout their tax debt. The commentary became dismissive about using a loan to payout the ATO and essentially wrote this off as an option. 

Go to your local branch and you might hear a similar story “You can’t get a loan for tax debt.” And they’d be totally right, at least about getting a loan from them.

In the broader lending market though this idea is totally wrong. A loan is absolutely a viable solution to paying off tax debt. It’s a solution that’s utilised all of the time.

How?

There are a number of specialist lenders that are happy to fund loans to payout ATO debt and other kinds of debt. 

  • You can use the equity in property, the same way you might take out cash to fund a growth opportunity. 
  • You can use any form of line of credit (there are lines of credit that don’t require property security). 
  • You can raise capital against equipment, machinery and vehicles. 
  • There are unsecured business loans that offer terms more favourable than the ATO. 

Lenders that offer all of these kinds of loans are very happy to support the payment of tax debt (even when you local branch won’t).

There are legitimate reasons why a business owner may need a loan to pay a tax debt. Seasonal businesses need to manage cash flow peaks and troughs and there’s finance options available to support this. There are also mistakes; like a client whose relatively new business was growing exponentially and their accountant had not educated them about payroll tax, so they had made no allowance for it in their budget. 

There are lots of reasons why tax debt can occur. There’s lots of approaches to take and a lending solution is definitely one if it’s right for you.

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