An established freight and plant hire business came to us after the ATO had issued them a Director’s Penalty Notice (DPN).
Like many business owners, they had found their existing finance connections could not assist them once the ATO had issued either a DPN or a default for tax debt on their credit file.
Assessing their situation it was clear the business was profitable and could service a loan of the size required to clear the ATO debt.
Leveraging the business’s substantial fleet, which was almost all owned outright, we approached an equipment finance provider that was happy to look past the ATO’s enforcement action to provide a Tax Debt Loan.
Using the client’s trucks and other assets, an equipment finance capital raise was completed that paid the ATO debt of $400,000 out in full with a repayment term over 5 years.
Tax debt sorted!
Benefits of A Capital Raise Secured By Equipment
The tax debt loan solution provided for the freight and plant hire business not only addressed the immediate concern of the Director’s Penalty Notice (DPN) issued by the ATO but also supported a longer term financial solution that helped ensure the business could move forward without further disruptions. Several features made this solution the ideal fit for the client.
Key Features of the Solution
- Extended Repayment Term
The ability to secure a 5-year repayment term was pivotal in ensuring the client could service the loan without straining cash flow. Many short-term loans often exacerbate financial difficulties, particularly when a business needs to make larger repayments in a shorter period. With the tax debt loan structured over five years, this provided the business with manageable monthly repayments, allowing them to focus on their day-to-day operations and ongoing expansion without financial stress.
- Fleet-Based Collateral
The client’s fleet of trucks and other plant hire equipment provided substantial collateral, which was key to securing a loan of this size at a lower rate.
- Specialist Equipment Finance Provider
One of the key reasons this solution worked so well was the involvement of an equipment finance provider familiar with dealing with ATO-related challenges. Many traditional lenders shy away from businesses with ATO debt, particularly when enforcement action has begun, like in the case of a DPN. However, the chosen finance partner had a deep understanding of the industry and was willing to assess the business beyond the ATO notice, focusing on its long-term profitability and the strength of the assets.
- ATO Debt Paid in Full
Clearing the ATO debt in full immediately removed the threat of further enforcement action from the ATO which could have escalated to a Statutory Demand.
Why This Was the Right Solution
For businesses facing tax debt, particularly when dealing with ATO enforcement action, finding a lender willing to look past the black marks on their credit file is a challenge. In this case, the combination of the business’s profitability and their asset list presented an opportunity for a lender with the right risk appetite to step in.
By opting for a loan secured against their fleet, the client avoided more drastic measures, such as selling off assets or stacking multiple expensive unsecured loans to secure the amount of funding required. The flexibility provided by the 5-year repayment term allowed the company to spread out repayments in a way that aligned with their cash flow cycles, ensuring they wouldn’t be caught short in other areas of the business.
The equipment finance provider also understood the nature of the plant hire and freight business, appreciating the importance of keeping the client’s trucks and equipment operational. This tailored approach ensured the loan was structured in a way that didn’t interfere with day-to-day operations or restrict future borrowing capacity for other business needs.
Long-Term Benefits for the Business
Beyond just solving the immediate issue of tax debt, this financing arrangement positioned the company for future success. By clearing the ATO debt, the business directors could restore their focus on business growth, taking on new contracts without the worry of ATO intervention.
In addition, the business retained control over its fleet, which is critical to its revenue generation. This is a prime example of how an intelligently structured loan can simultaneously address financial stress and preserve the operational capacity of the business. The equipment finance structure meant that, instead of selling off key assets, the client could continue generating income through their plant hire services while gradually paying down the loan.
Conclusion
This $400k tax debt loan, secured by leveraging the business’s existing assets and spread out over a manageable 5-year term, was the perfect solution for a business in a tough spot with the ATO. Not only did it solve their immediate tax issues, but it also provided breathing room to focus on future growth.
Need a tax debt loan solution? Talk to an expert.
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Funding is crucial for the growth of any small and medium enterprise. For businesses with bad credit, a good loan can help with financial recovery. Additionally, regular repayments can help repair a low credit score. If you need funding, loan experts can help guide you to the right loans, whether you have assets to use as security or not.
