A bridging loan can, in certain circumstances, be used to pay a tax bill.
After a person dies, their relatives can be faced with having to pay inheritance tax within six months after the death. This is not a problem if there is plenty of money in the estate, but in the case where most of the assets of the estate are property, the executor of the estate may not have enough to meet the tax demand before the deadline if the property remains unsold.
If the property is expected to sell within 6 to 12 months, then a bridging loan can be arranged by a bridging finance broker in order to cover the tax bill. The loan is repaid after the sale of the property has been completed.
Companies often have to pay tax bills at the end of July. For many businesses that have seasonal low sales periods in the summer, this can be a problem. Paying tax could severely impact their cash flow. Provided the business can show that income will increase within a few months, it is possible to obtain a bridging loan to cover the tax bill.
An approval in principle for a bridging loan can be made quickly, often in less than a day. Security for the loan will be required which is usually property, though lenders can consider other forms of security for businesses such as equity, stock, and equipment.
Few people like paying tax, but bridging loans can help to pay a large tax bill if the problem is a short-term cash flow issue.
