Smart Financing Strategies For Managing ATO Debt Challenges

Proactive debt management is crucial in ensuring long-term business stability and success.

As Australian businesses continue to navigate the economic aftermath of the COVID-19 pandemic, many face growing pressure from the ATO to settle outstanding debts. The ATO, which once adopted a lenient approach to debt collection, has now shifted to a more aggressive stance, demanding quicker repayment. Here’s how businesses can effectively manage this ATO debt crisis.

The Shift in ATO’s Approach

During the pandemic, the ATO allowed businesses to delay payments, providing much-needed relief during uncertain times. The ATO wasn’t pushing too hard to recoup the funds and gave lenient terms to extend the debt. This approach gave businesses breathing room to manage their cash flow amid economic uncertainty.

However, the last 6 to 12 months have seen a dramatic shift. Now, the ATO is coming out with a stick; essentially stating they have had enough, and businesses are subject to strict payment plans. These repayment plans generally require debts to be cleared within a few months, with interest rates as high as 11-13% p.a. This aggressive approach has placed significant financial strain on businesses.

The Double Impact: ATO Debt and Bank Financing

The stringent repayment demands from the ATO have a ripple effect, impacting a business’s ability to secure loans from traditional banks. Banks almost universally see ATO debt as a deal killer. When businesses apply for loans, banks typically check for outstanding ATO debts. If any debt is found, the loan application is likely to be denied, cutting off vital funding sources.

This creates a double bind for businesses: not only must they find a way to repay the ATO debt quickly, but they also lose access to additional financing that could help support their operations. This can put businesses in a precarious financial position, struggling to balance debt repayment and cash flow needs.

Non-Bank Lenders: A Practical Solution

To help businesses manage ATO debt, the Lending Solutions team is here to provide you with comfort when considering non-bank lenders. These lenders offer more flexible terms and longer repayment periods, easing the cash flow burden. Non-bank lenders have realised this is a fantastic opportunity. While the ATO may require repayment within a few weeks to two years, non-bank lenders might offer terms extending to 10, 20, or even 30 years. This significantly reduces the annual repayment amounts, making it easier for businesses to manage their finances.

Non-bank lenders offer a viable solution, allowing businesses to manage their cash flow more effectively while meeting ATO repayment demands. For tailored advice and support, get in touch with the PKF Lending Solutions team today.