A business loan to pay tax debt, without putting up property

Not every business that owes IRD has a house or a commercial building to borrow against. Many of the owners we hear from rent their premises, run lean, and have a debt that grew from one or two bad GST periods. For them, a property-secured loan isn’t on the table. A cash-flow loan might be.

What is a cash-flow loan for tax debt?

It’s a business loan assessed mainly on how money moves through your accounts, rather than on what you own. The lender reviews recent bank statements, looks at turnover, how regular the deposits are and what already goes out, and sizes a facility the business can repay from its takings.

For tax debt, the loan clears a specific IRD balance, often a GST or PAYE catch-up, so the penalties and interest stop building and IRD’s collection steps come to an end.

The typical range for these options is $5,000 to $500,000. Amounts at the lower end are common for small GST arrears; larger figures need strong, steady turnover.

Who does the unsecured route suit?

It tends to work for businesses that:

• have been trading for a while with income that shows up regularly in the bank;
• owe an amount that is modest compared with annual sales;
• fell behind because of a one-off event rather than a structural loss; and
• can show they are now keeping up with new GST and PAYE as it falls due.

It suits retail, hospitality, trades and service businesses well, because their takings are visible in the bank account week to week. Our page on IRD debt in hospitality looks at that sector in more detail.

How is it different from a property-secured loan?

	Cash-flow (unsecured)	Property-secured
Typical amount	$5,000 to $500,000	$20,000 to $5,000,000
Decided mainly on	Turnover and bank statements	Equity in residential or commercial property
Usual term	Shorter	Longer, with a planned exit
Repayment rhythm	Often weekly, sometimes matched to takings	Usually monthly or capitalised to exit
Suits	Smaller GST and PAYE arrears	Larger debts, statutory demands, multiple tax types

If you do have equity, even in a family home, it usually opens up larger amounts and longer terms. Read property-secured tax debt loans to compare.

Why does it matter which tax you owe?

IRD treats different debts differently, and lenders notice.

GST is money collected from customers on IRD’s behalf. GST falls due on the 28th of the month after the end of the period, with two exceptions: the March period is due on 7 May and the November period on 15 January (IRD). GST arrears are common, because the money sits in the same account as everything else. Our GST debt page covers how it builds.

PAYE and other employment deductions are more serious. They come out of your staff’s pay, IRD charges a 10% penalty on unpaid employer deductions plus a further 10% for each month the amount stays unpaid, and a director who decides not to pay them can be prosecuted personally (IRD late payment penalties). If you owe PAYE, deal with it first. See PAYE arrears.

Owe GST or PAYE and want to know if a cash-flow loan fits? Tell us the basics here. It takes about a minute and doesn’t involve a credit check.

What will the lender want to see?

Expect to provide:

1. Recent business bank statements, often three to six months.
2. Your myIR statement of account, so the exact amount and tax types are clear.
3. Details of any IRD letters, especially a deduction notice or statutory demand.
4. Existing debts and repayments, including any other cash-flow facilities.
5. Basic identification for the directors or owner.

Some lenders also ask for a short explanation of how the debt arose and what has changed. Keep it factual. “Our largest customer paid 90 days late during winter, and we’ve since moved them to upfront deposits” tells a lender far more than a long story.

Is there a risk of making things worse?

Yes, and it’s worth saying plainly. A short-term facility with frequent repayments can squeeze cash flow just as GST and PAYE keep falling due. If the repayments plus new tax are more than the business can carry, the IRD debt will come back and you’ll owe two parties instead of one.

Before you borrow, run the numbers on a typical month: takings in, wages, rent, stock, new GST and PAYE, and the loan repayment. If that doesn’t balance, an instalment arrangement with IRD may suit better, or a longer secured loan. Our arrangement vs loan cost check helps you compare in dollars, without any rates.

An illustrative example

Illustrative only. Not a real client and not an offer.

A Christchurch café owes about $34,000 in GST from two slow winter periods. It has steady weekday takings, pays its staff on time and has kept current PAYE up to date. There’s no property. A cash-flow loan sized on its bank statements clears the GST in one payment, so penalties stop and IRD’s calls end. Repayments are set weekly, matched to the café’s busier days, and the owner moves GST into a separate account every Friday from then on.

Want a straight answer on the cash-flow route?

If your business is trading and you’d like to know whether an unsecured loan could clear what you owe IRD, start your enquiry. There’s no credit check to ask the question, we don’t pass your enquiry to a crowd of other lenders, and a real person who knows how IRD works will call you. Please give accurate figures, especially turnover and the amount owed, so we can tell you quickly whether this route works or whether something else would serve you better.