VAT funding: All you need to know

Written by Paul Ward from Blue Star Business Finance 

Managing cash flow can be one of the biggest challenges for growing businesses – especially when VAT bills arrive before customer invoices have been paid.

Missing a payment isn’t an option, but tying up valuable working capital in a single lump sum can put pressure on day-to-day operations.

VAT funding provides a simple solution: spreading your VAT bill into smaller, manageable payments so you can stay compliant with HMRC while keeping cash free for the things that matter most to your business.

Here's al you need to know about VAT funding.

Why consider VAT funding?

VAT bills can fall due before customer payments arrive, creating a short-term cash flow challenge. VAT funding allows you to spread the cost of your VAT bill over three manageable monthly instalments, giving your business breathing space without disrupting operations.

How does it work?

Our funding partner pays your VAT bill directly to HMRC. You then repay the amount in three fixed monthly payments.

What does it cost?

Costs vary depending on your business performance and credit profile. As a guide, a £40,000 VAT bill spread over three months would typically incur around £2,200 in interest.

Are there any fees

Yes – a document fee of around £150, collected with your first direct debit.

How does Bluestar get paid?

We receive a commission from the funder, usually 2 per cent of the loan advance. This is paid by the funder and not added to your costs.

Is underwriting required?

Yes, all applications are subject to underwriting. We work with multiple funders who consider a wide range of business circumstances.

Minimum amount

The minimum advance available is £5,000.

Peace of mind

Once approved, lenders typically offer a 12-month rolling facility. This means that for future VAT bills, you only need to send us your VAT return and up-to-date bank statements for fast approval.

For more information, contact Paul Ward on [email protected]