Frequently Asked VAT Loan Questions

November 26, 2020

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Q: What is a VAT loan / VAT Funding?

A: All VAT registered businesses pay a quarterly VAT payment to HMRC. This can be burdensome and a strain on cash-flow. Having chunky quarterly payments going out is also a-typical to normal business cash-flow which runs month to month. Using a tailored funding solution to solve this, with a monthly repayment option is a method to smooth out the cash-flow.

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Q: How do VAT Loans work?

A: In essence, the solution is turning what would be a Quarterly payment in advance, into a monthly payment in arrears. Business VAT is paid (by the funder) upfront. Repayments are set equally in 3 monthly installments, with the first payment not due until the following month. Repayments are set typically on days 30, 60 and 90 – completed prior to the next VAT payment falling due and allowing businesses to roll over the funding each quarter if they choose to do so.

Q: Am I obliged to use the VAT funding each and every quarter?

A: Short answer is No. You can pick and choose when it suits your own situation to use the monthly repayment option. However, most businesses find that the solution works so well that they choose to roll the funding over each quarter as a matter of course.

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Q: How much can I borrow?

A: VAT funding ranges from £5000 and has no upper limit. However, it is likely that any business whose quarterly VAT payment is in excess of £1,000,000 would move to ‘Payment on Account’. We can still arrange funding options for businesses who ‘Pay on Account’ as there is still a quarterly shortfall that needs to be balanced.

Q: How long does it take before I can get a decision on my VAT loan?

A: Applications typically take between 24-48 hours. Once approved, we use a simple e-sign document and transfer funds on the same day.

For renewals in most cases, there is an automatic approval process which improves turnaround time and reduces the admin process.

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Q: What much does it cost to spread my VAT payment?

A: Interest rates start from less than 2%. Some funders charge a nominal fee although this is negligible, usually around £70.

Q: What kind of businesses would use a VAT loan?

A: In terms of industries we work with all SME and Professional businesses. Really the funding is available for any business who pays VAT. Any business that is seasonal by nature, or suffers from cash-flow concerns would benefit from using this product. Likewise, any business that depends on cash to fund its growth would find such a low cost, high cash-flow benefit facility to be useful.

Q: Are funds transferred to my business or HMRC directly.

A: Typically the VAT funders would prefer to pay HMRC directly. Upon approval, they would like to see a copy of the VAT return and would transfer that amount straight to HMRC on your behalf. If for some reason this doesn’t work, speak to the JPM team who can come up with a tailored solution to ensure funds are paid directly to your business rather than to HMRC. Although most businesses like the payment going straight to HMRC this is not usually a problem.

Q: Do I have to fund my entire bill, or can I part fund?

A: Absolutely part-funding is available. There is no requirement to fund the full amount, you have complete flexibility to fund as much or as little of the bill.

Q: When does HMRC require the VAT to be paid?

A: If you pay your VAT monthly or quarterly, the deadline for submitting your return and paying any VAT you owe is one calendar month and seven days after the end of the VAT period.

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Q: Can I spread my VAT payment over a longer period than 3 months?

A: Yes. Although we do not advise this and the specialist VAT lenders will not allow this there are circumstances which could mean a business would prefer a 12>36 month repayment option – which we could arrange.

Q: Can I finance my VAT bill after I have paid it?

A: Yes, you can finance your VAT bill up to 14 days after you have paid it

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Q: Can I fund an overdue VAT payment?

A: It depends on how overdue… Typically we can fund an overdue VAT bill up to 14 days after the due date.

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Q: I have been rejected for a loan before, can I still apply?

A: Yes. JPM are an FCA registered Credit Brokerage with access to the entire market. This means we can obtain the cheapest terms in the market, but in some situations i.e. bad credit / loss-making accounts, we would also have access to funders who consider different circumstances – although they may not necessarily be the cheapest we will always endeavour to find a solution for most circumstances.

Q: How do I apply for a VAT loan/funding?

A: Contact the experienced JPM team today who can talk you through the process, information required, and provide you with a tailored quote so you can factor the pricing into your decision making.

We will only request essential info and ensure the application process is as smooth as possible.

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