How to get a business loan with an ATO debt

Tax debt is one of the most common reasons business owners call us. A slow quarter, a big BAS bill or a few late-paying customers can turn into an ATO debt quickly, and once it’s there, it can affect your cash flow, your credit file and your ability to borrow. The good news: in many cases, you can still get a business loan with an ATO debt, and sometimes the loan can be used to clear it.

Can you get a business loan with an ATO debt?

Yes, in many cases. Major banks tend to be cautious with tax debt, especially if it’s large or unmanaged. But a number of non-bank and specialist lenders will lend to businesses with ATO debt, and some will fund the repayment of the debt as part of the loan.

What lenders want to see is that the debt is understood, under control and won’t keep growing. A business with a clear plan is a very different risk to one that is ignoring the problem.

Why ATO debt affects your borrowing

• It reduces your cash flow. Payment plan instalments come out of the same cash a lender expects to service their loan.
• It can appear on your credit file. The ATO can report certain overdue business tax debts to credit reporting bureaus, which other lenders can then see.
• It ranks ahead in some situations. Lenders consider the ATO a serious creditor, and director penalty notices can make the risk personal for directors.

Your options for dealing with ATO debt

1. An ATO payment plan

For smaller debts, a payment plan with the ATO can be the simplest option. Interest (the general interest charge) continues to accrue, so it isn’t free money, but it can buy time.

2. Refinance the tax debt with a business loan

Some lenders will lend specifically to clear an ATO debt. This replaces a pressing creditor with a structured loan, stops further ATO interest building on the balance, and can protect your credit file from further damage.

3. Consolidate tax debt with your other borrowing

If you also have several loans, equipment leases or director loans, consolidating everything into one facility can reduce your total repayments. We recently helped a chocolate manufacturer and retailer consolidate six lenders, clear its tax debts and repay director loans into a single $2m term loan.

4. Use property or equipment as security

If the business or its directors own property, a secured loan will usually offer better terms than an unsecured one. Private lenders can also move quickly when a debt needs clearing urgently.

What lenders will ask for

• Your ATO portal statement or integrated client account showing the balance
• Details of any payment plan and whether it has been kept up
• Recent BAS and lodgement history (all returns should be lodged)
• Business bank statements and financials
• A short explanation of how the debt arose and why it won’t happen again

How a broker helps

Lender appetite for tax debt varies a lot, and an application declined by the wrong lender can leave another enquiry on your credit file. We know which lenders on our panel of 100+ will consider ATO debt, how they assess it, and how to present your business so the full picture is clear. Find out more about our debt advisory and business loans.

This article is general information only and doesn’t take into account your objectives, financial situation or needs. Speak to us or your accountant before making a decision.