From paying bills in a timely manner to keeping track of the government’s regulations, here are six answers to the question, “How can working capital loans help pay off business taxes?”
- Provide Quick Access to Cash
- Spread Out Your Payroll Payments
- Make a Repayment Schedule
- Factor in the Accrued Interest of the Loan
- Help Avoid Penalties and Interest Charges
- Expedite the Loan Process
Provide Quick Access to Cash
Working capital loans can help businesses pay off business taxes by providing them with quick access to cash. This cash flow helps businesses meet financial obligations, such as paying tax bills in a timely manner. For example, a merchant cash advance (MCA) loan offers flexible repayment terms and is based on credit card sales.
An MCA loan advances money to the borrower against future credit card transactions so they can use the funds immediately to tackle their taxation needs. Ultimately, working capital loans provide businesses with much-needed liquidity to cover taxes or other expenses.
Michael Alexis, CEO, swag.org
Spread Out Your Payroll Payments
As a small business, one of the biggest expenses you will have is payroll. Payroll is not only an operational cost, but it’s one of the biggest taxes your business will have to pay.
Working capital loans can help you pay off payroll taxes by spreading out the payments. Having payroll taxes withheld from every employee’s check can take a toll on your business’s cash flow. Working capital loans can help you stay afloat and avoid making cuts to your payroll.
Matthew Ramirez, CEO, Paraphrase Tool
Make a Repayment Schedule
While working capital loans have the potential to offer rapid cash flow, companies must have a strategy in place to pay off the loan as quickly as possible. Businesses should make it their goal to repay the loan as quickly as possible to limit the amount of interest they pay.
Establishing a repayment schedule and setting aside cash solely to repay the debt may be necessary. Businesses can avoid any potential financial difficulty in the future if they make appropriate preparations in advance for the repayment of loans.
Hamza Usmani, Head of Content, SEO Audits
Factor in the Accrued Interest of the Loan
By taking advantage of the short-term nature of these loans and using the funds to pay off taxes, business owners can save money in the long run. Always remember to factor in the interest that will accrue on the loan.
Carefully budget for this so that you can make payments without a strain on your cash flow or risking defaulting on the loan.
Make sure you can pay back the loan in full before taking it out. This will help ensure that you stay out of debt and keep your business financially healthy.
Leo Vaisburg, Managing Partner, Amazon Suspension Lawyer
Help Avoid Penalties and Interest Charges
One key insight is that working capital loans can provide businesses with the funds they need to pay off taxes on time and avoid costly penalties and interest charges.
When businesses face unexpected tax bills, it’s challenging to come up with the funds to pay them off on time. Working capital loans provide businesses with the cash they need to cover these expenses and allow them to maintain their day-to-day operations and investments in growth.
Besides providing businesses with the funds they need to pay off taxes, working capital loans can also help to improve their creditworthiness and financial stability. By demonstrating their ability to manage cash flow and meet financial obligations, businesses can improve their credit scores and increase their access to future financing.
Nick Cotter, Founder, newfoundr
Expedite the Loan Process
Working capital loans can be an efficient way to pay off business taxes. For example, if a business is struggling and unable to gain sufficient liquidity through its own accounts, it could apply for a working capital loan in order to make the payment of its business tax liabilities. These loans are quick and easy to get, as they have a shorter repayment duration than other types of financing.
This expedited process of acquiring funds allows businesses to take care of their financial obligations quickly, without having to wait long periods, which could bring serious financial strain upon the company itself. This method helps businesses keep track of the government’s regulations while simultaneously improving the cash flow cycle needed to sustain operations successfully.
Julia Kelly, Managing Partner, Rigits