Can I apply if I have HMRC or VAT arrears?
Short answer
Yes — you can often apply for business finance if you have HMRC or VAT arrears, but eligibility depends on the size of the arrears, the type of finance you want, and the lender’s risk appetite. Lenders treat unpaid tax liabilities seriously, so disclosure, a credible repayment plan and up-to-date management information are essential. Best Business Loans does not provide loans directly; we help match you with lenders and brokers who may consider applications with arrears.
When arrears are a barrier and when they aren’t
Small, recent or negotiated arrears may not automatically rule you out of every finance option. Specialist lenders and brokers sometimes accept applications if you can show a manageable repayment plan with HMRC or evidence that arrears are being addressed.
By contrast, very large, long-standing or multiple unpaid tax liabilities increase perceived lender risk and will often lead mainstream banks to decline. Lenders will assess the company’s cash flow, security offered, director guarantees and the likelihood HMRC could take enforcement action.
In short: the presence of arrears does not equal automatic refusal, but it does change which lenders you can approach and what information they will require. Full disclosure at enquiry stage avoids wasted time and reduces the risk of a declined application appearing on records where relevant.
How arrears affect different types of finance
Overdrafts and traditional bank loans are generally the most sensitive to HMRC arrears because banks use comprehensive credit assessments and value long-term relationships. Banks may accept an application if a realistic Time to Pay arrangement with HMRC is in place and director security or collateral mitigates risk.
Asset finance, invoice finance and merchant cash advances are often more flexible because they rely on business assets or predictable receivables as security. Some providers focus on the strength of the underlying assets or invoices rather than historic tax compliance.
Short-term or bridging finance providers and specialist lenders may consider companies with arrears, but they typically charge higher rates or require stronger security. The key difference is lender appetite: mainstream lenders are conservative, specialist lenders and brokers are more pragmatic.
Practical steps to improve your chances
Address HMRC first — contact them to agree a Time to Pay or VAT payment plan and get confirmation in writing. Lenders view an active, agreed arrangement with HMRC more favourably than unresolved arrears or broken promises.
Prepare clear, recent financial documents: management accounts, a cashflow forecast and evidence of VAT returns submitted. These documents let brokers and lenders see how you will service new borrowing while meeting HMRC commitments.
Be transparent during applications and explain causes and fixes for arrears, such as a one-off trading shock or seasonality. An honest, evidence-backed explanation plus demonstrable steps to prevent repeat arrears builds lender confidence.
What lenders and brokers will ask for
Expect lenders to request detailed information: size and age of HMRC and VAT arrears, proof of any repayment agreement with HMRC, recent business bank statements, and management accounts. They will also want a detailed cashflow showing how you intend to meet both HMRC payments and new finance repayments.
Some lenders require director personal guarantees, company asset valuations, or a charge over assets as additional security. Specialist brokers can explain which providers typically accept weaker credit profiles in exchange for higher security or costs.
Because Best Business Loans introduces you to lenders and brokers, we recommend submitting a Quick Quote that clearly states any arrears so our matching AI can prioritise lenders likely to consider your application. For broader funding options, see our business finance overview at https://bestbusinessloans.ai/loan/business-finance/.
Alternative routes and next steps
If standard loans are unavailable, alternatives include invoice finance, asset-based lending, hire purchase, equipment finance and merchant cash advances. These products can release cash quickly and are often less affected by tax arrears when the security is robust.
Debt consolidation or refinancing can sometimes be used to manage multiple debts, but consolidating HMRC arrears should be done with caution and professional advice. Insolvency options are a last resort and have serious longer-term implications for directors and the company.
To explore tailored options without committing, submit a Quick Quote for a Decision in Principle / Eligibility check and we’ll introduce you to lenders or brokers suited to businesses with HMRC or VAT arrears. Best Business Loans is an introducer and does not provide regulated lending itself.
How to approach HMRC and communicate with lenders
Contact HMRC early to demonstrate good faith and secure a formal repayment plan when possible. Keep records of all agreements and payments as lenders will want to see proof you’re complying with any Time to Pay arrangement.
When speaking to lenders or brokers, state the arrears amount, the agreed repayment schedule (if any) and provide up-to-date management accounts. This transparency speeds up eligibility checks and helps us match you with the most relevant providers.
Compliance and fairness — what to expect from finance marketing
We aim to be fair, clear and not misleading in all communications about finance options and costs. We don’t guarantee acceptance, approval or specific terms, and any finance offer will be subject to the lender’s own checks and regulatory requirements.
Best Business Loans operates as an independent introducer and will only put your details to lenders or brokers who match your business profile and needs. Always review lender terms carefully and seek independent advice where appropriate.
Key takeaways
- Having HMRC or VAT arrears does not automatically stop you applying for business finance.
- Smaller arrears with an agreed HMRC repayment plan improve your chances significantly.
- Different finance types react differently to arrears — asset-backed and invoice finance are often more flexible.
- Be transparent, prepare strong financials and consider specialist brokers where needed.
- Submit a Quick Quote for an eligibility check so our AI can match you to lenders likely to consider your circumstances.
Ready to check eligibility?
If you have HMRC or VAT arrears and need a quick eligibility check, complete our Quick Quote for a free, no-obligation Decision in Principle. We’ll analyse your details and connect you with lenders and brokers who may accept applications with arrears. Start here for a fast, confidential review.