VAT loans
A VAT loan is a short-term loan sized to your quarterly VAT bill. The lender pays HMRC or transfers the cash to you, and you repay over 3 to 6 months out of the next VAT quarter. UK tickets run £5,000 to £500,000, priced at roughly 1.5% to 3.5% per month, with a decision in 24 to 72 hours. It suits a business whose VAT bill lands in a thin cash month.
Director, FundBiz
Oliver leads FundBiz's specialty finance comparison and matching engine. With a background in UK commercial finance, he oversees lender partnerships, eligibility logic and post-decline routing.
Last reviewed: 1 July 2026
At a glance
- Ticket size
- £5,000 to £500,000
- Typical rate
- 1.5% to 3.5% per month
- Term
- 3 to 6 months (one VAT cycle)
- Repayment
- Equal monthly
- Decision
- 24 to 72 hours
- Security
- Usually unsecured + director PG
How a VAT loan works
You tell the lender your VAT bill and quarter-end date. On approval the lender either pays HMRC directly or sends the funds to your account to settle the bill, then you repay the advance in equal monthly instalments across the quarter. Because the facility is short and self-liquidating, lenders decide fast and rarely need security beyond a director’s personal guarantee.
What a VAT loan costs
Cost is the monthly rate on the balance plus a small arrangement fee. Typical UK illustrations:
| VAT bill | Term | Monthly rate | Approx. interest (flat) |
|---|---|---|---|
| £20,000 | 3 months | 2% / mo | ~£1,200 (6% of the bill) |
| £50,000 | 4 months | 2% / mo | ~£4,000 (8% of the bill) |
| £100,000 | 6 months | 2.5% / mo | ~£15,000 (15% of the bill) |
Source: FundBiz VAT loan cost illustration, flat-rate basis
View as plain-text Markdown
### VAT loan cost on a flat-rate basis (rate x months x bill). Illustrative only; real facilities may reduce on the outstanding balance, so ask each lender for the total repayable before signing. | VAT bill | Term | Monthly rate | Approx. interest (flat) | | --- | --- | --- | --- | | £20,000 | 3 months | 2% / mo | ~£1,200 (6% of the bill) | | £50,000 | 4 months | 2% / mo | ~£4,000 (8% of the bill) | | £100,000 | 6 months | 2.5% / mo | ~£15,000 (15% of the bill) | Source: FundBiz VAT loan cost illustration, flat-rate basis
VAT loan vs HMRC Time to Pay
HMRC’s Time to Pay arrangement spreads a VAT bill and charges interest at the official HMRC late-payment interest rate, usually cheaper than a VAT loan’s monthly rate. A VAT loan wins on speed, on keeping HMRC off your file, and where a Time to Pay request is declined or you have already used one. Most directors weigh cost against the risk of an HMRC mark, so run both before deciding.
When a VAT loan fits
- Seasonal businesses where the VAT bill lands during a thin trading month.
- Businesses spending heavily ahead of revenue (stock for the new season, project investment).
- Recruiters and contractors with delayed end-client payment cycles.
- Avoiding HMRC late-payment surcharges and enforcement.
When it does not
Recurring VAT shortfall. If the same gap appears every quarter, a VAT loan is treating a symptom. The right answer is restructured working capital (a term loan, invoice finance, or an MCA against ongoing card flow) rather than rolling VAT loans.
Lenders we route to
Specialist VAT funders plus mainstream working-capital lenders that offer it as a sub-product. iwoca plus a handful of HMRC-focused specialist funders are among the active providers. FundBiz reviews the panel and routes your file to the lenders most likely to say yes.
Frequently asked questions
What is a VAT loan?
A VAT loan is a short-term business loan sized to your quarterly VAT bill. The lender pays HMRC directly or transfers the funds to you, and you repay over 3 to 6 months out of the next VAT quarter. It spreads a lump-sum VAT liability across the quarter so it does not drain cash in one month.
How much does a VAT loan cost in the UK?
Most UK VAT loans are priced at roughly 1.5% to 3.5% per month on the balance, plus a small arrangement fee. On a £50,000 VAT bill over 4 months at 2% per month that is about £4,000 in interest. The rate depends on turnover, trading history and credit profile, so check the total repayable before you sign.
Is a VAT loan cheaper than HMRC Time to Pay?
Not always. HMRC Time to Pay charges interest at the official HMRC late-payment interest rate, which is usually lower than a VAT loan’s monthly rate. A VAT loan wins on speed, on keeping HMRC off your file, and when you cannot agree a Time to Pay arrangement. See our full VAT loan vs Time to Pay comparison.
Can I get a VAT loan with HMRC arrears or bad credit?
Sometimes. Specialist lenders will consider a VAT loan even with existing HMRC arrears or a bruised credit file, especially if the business is trading profitably. Terms are tighter and a director’s personal guarantee is usually required. FundBiz routes these to the lenders on our panel most likely to accept the file.
How quickly can I get a VAT loan?
A decision typically takes 24 to 72 hours and funds can follow within a day or two, which is why businesses use VAT loans against a looming HMRC deadline. FundBiz uses a soft-search matcher, so checking eligibility leaves no footprint on your credit file.
Who is eligible for a VAT loan through FundBiz?
VAT-registered UK limited companies, LLPs and partnerships of 4 or more that file quarterly VAT. Sole traders are out of scope. Lenders will look at turnover, trading time and how the VAT bill compares to normal cashflow.
Check what you can raise against your VAT bill
Open the VAT loan eligibility checker →Soft search, no credit-file footprint. Limited companies, LLPs and partnerships of 4+ only.
Last reviewed: 1 July 2026.