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You are at:Home»Finance»New VAT on Purchase Loan
Budget

New VAT on Purchase Loan

0
Posted By sme-admin on January 20, 2021 Finance, News

Martine Catton, Chief Commercial Officer, explains,” Newspaper headlines tend to focus on the potential high number of business failures caused by COVID and the various lockdowns. However, little attention is given to those businesses that have weathered the crisis well by being innovative, creative and adaptable.

“These businesses are facing a different challenge – how they are going to finance increasing opportunities to invest and grow while also keeping an eye on inevitable cash flow challenges.The new loan facility, between £10,000 to £1 million, is designed to cover VAT paid on commercial properties or other large asset purchases. It is for a maximum six month term in order to provide flexibility while claiming back VAT from HMRC.”

Martine adds, “ A classic example would be a business that is presented with an opportunity to buy the ideal commercial property that has become available. The price is £250,000 but with the VAT added on another £50,000 has to be found. Of course this £50,000 can be claimed back from the HMRC but this takes on average about four months. This extra money can be an initial deal breaker with some funders unwilling to advance further monies to cover this liability. Even if it isn’t this is £50,000 that can be more usefully used within the business and can greatly ease post-COVID cash flow issues.”

“It’s important for lenders to anticipate the COVID challenges SMEs are going to be facing and provide the flexible finance facilities they need. This will leave businesses better placed to make a major contribution to the UK’s economic recovery

 

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