How the banks help the ATO….

When it comes to small business, the ATO must love the Big Banks these days. Why? Banks have placed a high level of importance on businesses having their tax affairs in order. If businesses have tax arrears or even an ATO sanctioned repayment arrangement in place, obtaining finance can be tough.
Invariably, before approving or continuing funding arrangements, businesses will be asked for an update on their tax position. Banks will want to know that all taxes are both lodged and paid.
There may well be legitimate reasons why small businesses aren’t lodging and paying their tax but unless there is a great story, banks simply see tax arrears as a potential sign that the business is under cash flow stress. Worse still, they fear the ATO may take action to recoup unpaid taxes which could place the Bank’s exposure at risk.
So what does this mean if you are looking for finance for your business and your tax position isn’t ideal?
Firstly, if you find yourself behind, there are financiers who are open to assisting – and they can be reasonably priced too so you won’t feel like you are being taken for a ride. You will still need a fundamentally good business but there are definitely some options available.
But the best way to manage working capital? Don’t wait until your only option is to hold off on lodging and paying tax. Review your lending structures now and make sure they are at the right level to meet your working capital requirements – and make sure that your banking relationship can grow and change with you.
I recently met with a client who had a fantastic business but they had slowly incurred tax arrears – they had grown quickly but their lending limits hadn’t grown with their working capital needs.
They didn’t have a great banking relationship so they saw the ATO as an easier form of short term finance. However, the short term became longer term and the ATO were less inclined to assist. When they finally went to the banks for a longer term working capital solution, the banks weren’t interested in assisting until their tax arrears were addressed. They are now back on track but their growth was restricted for a time as a result. The result could have been much worse.
If you need help ensuring you have the room in your working capital facilities to grow and thrive, give me a call!
Rohan

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