It’s a feeling that many business owners know well — discovering a tax bill is due, and realising you might not have enough available working capital to pay it.

Unexpected costs of any kind can be tough to handle. VAT is paid quarterly, and corporation tax annually, so you should have plenty of time to plan for them — but of course that’s easier said than done. All it takes is a late paying customer or some broken down equipment at the wrong moment to put your business in a precarious position.

Take action straight away

The absolutely crucial rule for tax bills is that you must do something about them immediately. If you can pay the bill, do so — even if it puts pressure on your other obligations. Remember, Her Majesty’s Revenue and Customs has the power to close your business for good if you fail to pay, so don’t wait for reminder letters to pile up before you do something about it.

If you can’t pay the bill straight away, it’s still very important to talk to HMRC as soon as possible. Sometimes they’re willing to negotiate a repayment schedule, and while they might refuse, it’s worth a try. If they demand you still need to pay the full bill straight away, there’s a range of finance that could help get you out of a tight spot.

Fast finance to pay tax bills

Clearly, a key feature you should look for in finance for a tax bill is speed. If the deadline has snuck up on you, you’ll want to get the funds in your account as soon as possible, and there’s a few ways you can do it depending on your business profile.

Merchant cash advances

If you receive card terminal payments, a merchant cash is advance is almost certainly the fastest way to arrange finance — it’s often possible to have them in place within hours. Merchant cash advances are organised through your payment processing company and the lender, which means with your approval they can look into your recent payment details and immediately agree a loan amount.

When it comes to the repayments, they’re taken at source as a percentage of card terminal receipts — so they go up and down with your revenues. Because repayments are taken at source, they never hit your bank account, and so can often feel quick and painless.

Invoice finance

For companies that trade on credit, invoice finance is another quick way to raise money against revenues, in this case using due invoices. There are a few variations of invoice finance but the key idea is that the lender looks at your sales ledger and advances up to 90% of the owed invoice value. When your customers pay, you get the remainder minus the lender’s fees.

Asset refinance

If you’ve been taken by surprise by a tax bill, it’s likely that you don’t have enough working capital to pay it. Therefore, it can be very useful to ‘unlock’ value from assets your business already owns. If you have enough equity in commercial property, heavy machinery, vehicles, or stock, many lenders are willing to use these as security for a business loan.

You could also use a product like sale and leaseback, which means you sell your asset to a lender but keep using it while they lease it back to you. This will add a monthly payment to your balance sheet — but will also release the value tied up in the asset.

Conclusion

Fortunately, there are lots of different ways that businesses can get hold of cash quickly, and it’s no longer necessary to rely on the banks. Whatever product you decide on, remember the most important thing about funding tax bills — act now, before it’s too late.

Conrad Ford is chief executive of Funding Options, recently described by the Telegraph as “the matchmaking website for small businesses and lenders”.