VAT loans are always paid directly to HMRC. This ensures that you meet the legal requirements of being VAT registered and that you avoid late payment penalties. A VAT loan can also smooth out your cashflow. Instead of paying one large quarterly bill, the payment can be spread across monthly instalments for up to one year – (although there will be interest to pay on the loan). Funds freed up by using a VAT loan can be invested into other areas of your business. Additionally VAT loans do not use existing banking or credit facilities and they may be arranged as ‘rolling’ or drawdown borrowing, (subject to eligibility). This arrangement allows the borrower to use loan funds on a fluctuating basis, much like an overdraft.