Can your business get a loan for tax payments?

Business taxes tend to be a lot more complicated than personal taxes, and financing for these obligations is more common than you might think. Unexpected cash flow gaps and tax law complexity can contribute to unforeseen tax burdens.

For example, your small business might expand across state lines without realizing it now owes taxes in this new jurisdiction. When tax season rolls around, and your accountant flags the need to pay back taxes, your business may not have the cash flow to cover this new cost.

Loans can help small businesses with tax debt, giving companies more flexibility to deal with situations involving:

• Back taxes or missed payments
• Quarterly tax deadlines
• Seasonal shifts in cash flow
   

Missed or delayed tax payments can come with serious consequences. Interest accrues quickly on missed payments to the IRS, which can divert funds away from other business expenses over a longer period of time. In more severe cases, the IRS can put a lien on your business assets, which can limit access to future funding and, in extreme situations, lead to hefty fines or jail time.

Luckily, you don't need to forgo payments on other overhead expenses to cover unpaid taxes. With the help of financing options, you can meet both your tax obligations and cover your ongoing operational costs. You might look into:

• Business tax loans. Most traditional business loans have interest rates below 10%, which can make them an appealing option for financing tax payments. However, these are also the hardest types of loans to qualify for — and businesses that are already behind on their taxes might not have the credit to qualify for the most favorable terms.
• Alternative lending. Online business loans tend to have higher interest rates, sometimes well above 10% APR. In cases where you have a lien looming and don't have other cash flow solutions, this can still be a helpful tool. You might also look into Small Business Administration (SBA) loans, lines of credit, or merchant cash advances (MCAs) as other alternatives.
• IRS payment plans. IRS payment plans don't front you cash flow like loans do, but they may offer you more reasonable repayment timeline terms. If you owe back taxes, you may be eligible for a voluntary disclosure agreement (VDA), amnesty program, or other penalty relief.
   

In short, you can get a loan or other influx of cash in order to cover your taxes. The first step is to speak with a tax expert to see what your obligations are and what financing options offer the best terms based on your eligibility.

Taking out a loan for tax payment typically makes sense when the overall cost of the loan is less than the cost of penalties for delayed or missed payments to the IRS. It might make sense if you need to:

• Prevent federal tax liens to maintain good credit
• Avoid seizure or freezing of assets like bank accounts
• Maintain healthy cash flow during a seasonal dip
   

Keep in mind that all lending and financing solutions come with their own set of risks. If you don't plan carefully, you may end up with greater debt or cash flow problems. Always speak to a tax expert to understand what you're obligated to pay and when.

CTA: Speak with an Avalara AvaTax expert today.

Even if lending makes sense, alternative financing options can sometimes give you greater control and more favorable terms than traditional loans.

Avalara Capital is an integrated financing service for AvaTax users. Purpose-built to help small businesses finance tax debt then focus on long-term growth, this line of credit is simple and streamlined. Apply in minutes directly from your AvaTax dashboard and see your borrowing limit. There's no hard credit check or personal guarantee required.

Funds from Avalara Capital can be applied toward outstanding tax debt. You can also keep the line of credit open as an always-on cash flow resource to cover growth opportunities without jeopardizing operational funds. Avalara Capital offers transparent pricing with no hidden fees, quick access to funds (think days, rather than weeks), and minimal paperwork.

If paying taxes is a financial priority for your business in order to avoid accruing interest, fees, and liens, Avalara Capital offers an alternative to traditional loans that allows you to stay compliant and maintain liquidity. How you pay the business taxes you owe depends on your circumstances, and you should always consult with a tax professional to understand your full obligations.

Learn more about Avalara Capital financing options.