Can I get a business loan with an IRD debt?

Mr hears some version of this every week: “I owe IRD and I’m embarrassed to ask anyone for money.” Here’s the thing — tax debt is one of the most common reasons New Zealand businesses borrow. A sticky year, a big provisional tax bill, a customer who didn’t pay, and suddenly GST that was collected has been spent on wages. It happens to good operators. What matters is what you do next.

Does an IRD debt stop me getting a business loan?

No, not on its own. IRD debt is considered case by case. What a lender wants to understand is:

• How much is owed, and roughly how it’s split between GST, PAYE and income tax.
• How old the debt is, and whether it’s growing.
• Whether your returns are filed. Unfiled returns are a bigger worry than the debt itself.
• Whether there’s a plan — an instalment arrangement with IRD, ideally one you’re keeping to.
• What the business looks like now. Is today’s trading covering today’s tax?

A business that fell behind once, has filed everything, and has a plan reads very differently from one that has stopped filing and isn’t answering IRD’s calls.

Why is IRD debt more urgent than it used to be?

Inland Revenue has stepped up collection. In October 2025 it said it was phoning businesses with debts of $10,000 or more that were between six months and five years old, and that it had sent about 16,500 deduction notices from mid-June — a quarter more than the year before — recovering money straight from bank accounts. In January 2026 it announced a focused campaign on overdue GST and employer debt, warning that non-responders could face in-person visits, bank deductions and, ultimately, bankruptcy or liquidation proceedings.

On top of that, penalties keep running. IRD charges a 1% late payment penalty the day after the due date and a further 4% on the seventh day, and use-of-money interest applies to unpaid tax. For PAYE and other employer deductions, an extra monthly penalty also applies. Our guide IRD has called about your debt: what to do in the first week walks through the practical steps.

When does borrowing to clear IRD make sense?

Situation	Often a sensible path
Debt is modest, cash flow can cover it over months	Instalment arrangement with IRD may be enough
Debt is large, penalties growing, business is sound	Loan to clear IRD, often property-secured
IRD is pressing hard (deduction notices, demands)	Urgent conversation — a loan may stop enforcement
Trading isn’t covering current tax	Fix the trading first; a loan alone won’t hold

A loan swaps a creditor who can garnish your bank account and wind up your company for a lender with an agreed repayment schedule. That can be a relief. It isn’t free, so compare the full cost with what staying in arrears costs you.

What should I do before I ask for a loan?

1. File every overdue return, or get your accountant to.
2. Log into myIR and download a statement of account so you know the exact balance.
3. Talk to IRD. Even a phone call to say you’re arranging finance changes the tone.
4. Consider an instalment arrangement to show good faith — see what’s an instalment arrangement and will a lender care?
5. Check what’s on your credit file, including whether IRD has shared company tax debt — explained on can IRD tell credit bureaus about my tax debt?

When you’ve got those pieces together — or even while you’re working on them — ask a specialist about clearing it.

Secured or unsecured for an IRD clean-up?

Smaller tax debts in a business with steady trading may be manageable with unsecured options, typically $5,000 to $500,000. Larger debts, or debts combined with patchy credit, usually need property security, with business loans from $20,000 to $5,000,000. Payment can often be made directly to IRD at settlement, so the money goes exactly where it’s needed.

What stops this happening again?

• A separate tax account where GST and PAYE are set aside every time you’re paid.
• A provisional tax option that suits your income pattern.
• Reviewing your tax position quarterly with your accountant, not once a year.
• Using the tax due dates tool to see what’s coming.

An illustrative example: the builder and the GST backlog

This case is invented, but it’s typical of what Mr hears.

A residential builder in Whangārei had a tough eighteen months: a developer client went into liquidation owing a large progress payment, and materials costs rose mid-contract. To keep crews paid, the company stopped paying GST for three periods and fell a month behind on PAYE. Returns were still filed. IRD has started calling and has mentioned deduction notices.

The business has since picked up two solid contracts with reliable clients, and current GST and PAYE are being paid on time. The two directors own a home in Kamo with reasonable equity.

What a lender is likely to focus on:

• Returns are filed — a big tick. The balance is known.
• The cause is explainable — a client failure, not a habit.
• Current tax is being paid — the hole has stopped getting deeper.
• New contracts — evidence that trading will support repayments.
• Property is available — so a property-secured loan to clear the whole IRD balance, with funds paid straight to IRD, is realistic.

The directors’ first steps: download the myIR statement, tell IRD they’re arranging finance, and gather the new contracts and six months of bank statements. With those in hand, a specialist can move quickly.

IRD debt myths Mr hears often

• “Lenders won’t touch me if I owe IRD.” Many will. It’s considered case by case.
• “If I stay quiet, IRD will leave me alone.” IRD’s 2025 and 2026 campaigns show the opposite.
• “An instalment arrangement looks bad.” One you’re keeping to usually looks responsible.
• “I should wait until I can pay it all.” Penalties and interest keep running while you wait.
• “Filing will just show how much I owe.” Exactly — and that’s what lets everyone help.

Ask about clearing your IRD debt

Tell us roughly what you owe IRD, what kind of tax it is and whether returns are up to date. There’s no credit check to ask, nobody else gets your details, and a real person will tell you plainly what’s realistic.

Accurate figures help most here — please include the IRD balance as it stands in myIR. That way the first option we suggest is one that can actually clear it. Ask Mr about a loan to pay IRD.