VAT Financing

The process is relatively simple. If you opt for this specialist type of loan, your lender will cover the cost of your business’ VAT bill, paying HMRC directly. 

There are a couple of options for repayment. The first is that you can reimburse the loan by making set monthly repayments. Alternatively, you can repay your lender when you are refunded by HMRC, minus any fees and interest.

You can use VAT loans to manage your company’s cash flow more effectively, especially given the amount of time it takes to be reimbursed by HMRC. You can also relieve the pressure of making large payments to HMRC that would put significant pressure on your cash reserve or income that you are likely to need for operations and the day-to-day running of your company.

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How Does VAT Financing Work?

In principle, all VAT-registered businesses can apply for a VAT loan. There are many lenders in the space, but most of these providers offer four or low five-figure loans, primarily to small and medium business owners. 

If you are on the market for a large VAT loan, working with Enness will give you access to the specialist providers of this type of finance. Many don’t publicise their services or prefer introductions from trusted connections like Enness. In certain parts of the market, who you know is central - and sometimes the only way - to find a provider who can offer you a loan the size you need. 

Addtional information can be found on our What To Know About VAT Finance blog post.

How to Use VAT Finance

Depending on your business, you may generate very significant VAT bills. Whilst these can be reimbursed, the fact that they have to be paid upfront can present a cash flow challenge if you are liable to pay hundreds of thousands of pounds in VAT.

You may also find you have a large, one-off VAT bill to pay if your business purchases a commercial property. On top of your deposit, stamp duty, legal costs and getting your investment set up to start generating revenue, a VAT bill is often one more unwanted cost which could potentially leave you with restricted funds for other business-critical investments. You won’t want to pour valuable cash into paying off your VAT bill, which would potentially leave you with restricted funds for other business-critical investments.

Taking out a loan to pay your VAT bill is an ideal solution. However, taking out a "traditional" business loan to cover your VAT liability doesn’t always make sense, given you will most likely only need a stopgap solution until you are reimbursed by HMRC. VAT financing offers a short-term, simple solution that eases pressure on your cash reserves while providing a quick solution to an urgent problem.  

Applying for VAT Finance

Enness will start by discussing your needs and understanding more about your situation and how much VAT you are eligible to pay. It’s important to note that VAT financing is a solution to a short-term cash flow issue. Lenders will want to ensure that you have a healthy business that generates good revenue and that you turn a profit. You will also need to satisfy lenders that you want a cash flow solution rather than provide a 'quick fix' to a more critical problem in the business or shift debt around. 

When Enness understands your needs, your broker will then contact specialist lenders in the space. Enness knows all the providers of high-value VAT lending, and they will go straight to the source of the best rates and terms. Your broker will operate quickly, and you can expect deals in 24-48 hours. 

Given you may have a VAT invoice that needs to be paid when you start considering this type of finance, time is often of the essence. These deals can be completed quickly, and Enness will also ensure that things move at pace. When the deal is negotiated and terms are signed, your lender can settle your invoices directly with HMRC in as little as a few days or a week.

Costs of VAT Loans

For £1m plus deals, lenders will assess you individually and rates will vary from lender to lender. The interest rate you are offered, and the cost of VAT finance will vary significantly depending on how much you are borrowing, how long you are borrowing for, and the terms you are hoping to negotiate.

Which Businesses Are Eligible For VAT Finance?

VAT finance is available for businesses of all sizes and there are relatively few restrictions on the y businesses that can borrow. You will be able to access VAT finance as long as you are VAT-registered in the UK and your business is in good financial standing, has a good credit history and solid income and cash flow projections that support borrowing.

VAT finance is available at almost any size as some lenders offer loans of just a few thousand pounds to cover a VAT obligation. Successful small and medium enterprises (SMEs) tend to require loans around the £50,000 mark, but it’s equally possible for larger businesses with more significant liabilities to access loans of £1 million or more. Enness can arrange VAT loans for any amount over £50,000.

In principle, all VAT-registered businesses can apply for a VAT loan. The lenders that offer this type of finance tend to operate in specific parts of the market – some players will offer SMEs smaller loans at larger volumes, and other lenders work with bigger companies, writing just a few, very significant loans each year.

Using VAT Finance To Optimise Cash Flow

Many sucessful businesses chose to use VAT finance as a way to optimise and manage their cash flow as effectively as possible. 

By opting to raise finance to settle their VAT liability, businesses can effectively keep working capital available within the company.

The VAT loan is effectively paid off in monthly installments, which is easier to manage from a cash flow and accounting perspective than it is to pay off the liability as a single lump sum. 

Enness can arrange these loans quickly and the rates are often very competitive when considering the advantages of retaining capital within the business for higher-ROI projects or investments, or simply to ensure the business retains enough working capital reserves.



Why Enness for VAT Financing?

Most lenders in the VAT loan space specialise in granting relatively small loans to small and medium-sized businesses. As a result, these lenders’ processes, risk analysis, rates and terms are set up for high-volume, low-cost deals. Many of these lenders will baulk at offering a high-value loan.

Enness are expert negotiators of high-value VAT financing, and they have access to all the specialist lenders in the space. You will find that a broker like Enness will open doors, and you will have access to more advantageous rates.

Contact Enness

Contact Enness

No matter how much you want to borrow, Enness will secure competitive VAT finance for your business. Contact Enness for a no-obligation chat to discuss what you need and how the team will be able to help you.

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