Best Business Loans If You Owe the IRS

If your business owes the IRS, the best loans come from funders that review your current sales and accept that you have a payment plan in good standing. Merchant Fund Express is our recommended funder for fast working capital based on your deposits. But the first step is almost always an IRS payment plan; after that come Credibly, a local CDFI or your bank, depending on your credit and how fast you need the money.

Owing the IRS does not close every door, but it changes the order of things. A funder will ask how much you owe, whether you already have an agreement and whether a tax lien has been filed. This guide explains which options exist, what the IRS says about its payment plans, and how to present your file so your tax debt is not an automatic no.

The best business loans if you owe the IRS, in order

We ranked these options on verifiable criteria: speed, time in business, minimum credit, ITIN acceptance, documents, amounts and collateral, plus one extra question for this page: do they work with businesses that owe taxes? No made-up ratings; the method is in how we rank business funding options.

1. Merchant Fund Express (recommended funder). Reviews your sales and deposits, not just your credit, with amounts from $5,000 to $5,000,000, credit from FICO 500+ and decisions that often arrive in 2 to 4 hours. Collateral is not required in most cases, it accepts applicants with an ITIN (no SSN needed) and it offers Spanish-speaking support. Tell them up front how much you owe the IRS and whether you have a payment plan; hiding it only delays the decision.
2. IRS payment plan. Not a loan, but usually the first move. The IRS offers payment plans: short-term plans to pay in 180 days or less, and long-term plans with monthly payments. Individuals can apply online for a long-term plan if they owe $50,000 or less and have filed all returns; businesses must contact the IRS through the channels listed on their notice or at a taxpayer assistance center. Penalties and interest keep accruing until you pay in full.
3. Credibly. Publishes general requirements of 6 months in business, a credit score of 500 or higher and $15,000 in average monthly deposits. It offers $5,000 to $600,000. If you have tax debt, ask first how they evaluate it.
4. Local CDFIs. Community development financial institutions usually look at your full story, and some offer financial coaching. They take longer, but they can help you build a plan to get out of debt.
5. Your bank or credit union. If you have a good relationship, good credit and a current IRS plan, it is worth asking. Many banks are strict about tax liens, so bring your agreement in writing.

Quick comparison

Some options usually will not work while you owe taxes. Kiva, for example, requires that you have no liens. And SBA programs generally check whether you have delinquent federal debt, so it pays to have an IRS agreement in place first. For more depth, read funding when your business owes back taxes.

The federal tax lien: what weighs most

When a funder sees IRS debt, what really worries them is the federal tax lien. The IRS files a public document, the Notice of Federal Tax Lien, to alert creditors that the government has a claim on your property. That puts the IRS ahead of other creditors.

• No lien and a current plan: the best position. Many revenue-based funders can work with you.
• A lien and a current plan: harder, but not impossible. Bring the agreement and proof of payments.
• A lien and no plan: most funders will ask you to settle with the IRS first.

The IRS explains that, in certain cases, a lien notice can be withdrawn if you owe $25,000 or less, your plan is by direct debit and pays off the balance within 60 months or before the collection statute expires, and you are current on your other obligations. If you owe a bit more than $25,000, the IRS says you can pay the balance down to that level before requesting withdrawal. Review it with a tax professional, because removing the notice changes a lot about how funders see you. For more on this specific situation, see business funding with a tax lien.

How to present your file if you owe taxes

This is how to look your best to a funder when you owe taxes:

1. Get current on your filings. Many IRS agreements require that all required returns be filed. Without that, there is no plan.
2. Get your agreement in writing. The IRS letter showing the balance, the monthly payment and the plan status.
3. Show your IRS payments. Three or more months of on-time payments on your bank statements say a lot.
4. Clean up your business account. No negative days, and every sale deposited.
5. Explain what happened. One or two lines: a bad year, an accountant who did not file, a customer who did not pay. Funders understand a clear story better.

Timing matters too. If you just entered a plan, some funders will want to see a few months of payments before making an offer. If the IRS has already sent levy notices on your accounts, deal with that first: a levy can freeze your business account right when the funding lands. And if you use an accountant, ask for a short letter explaining your debt status and plan; it saves underwriters a lot of questions. If you are already on a plan, our guide to the tax payment plan covers how it works.

Not all tax debt is equal

Not every tax balance weighs the same. Keep this in mind:

• Payroll taxes: the most sensitive, because they include money withheld from your employees. If you owe payroll taxes, talk to an accountant or tax professional immediately and do not put it off.
• Business or personal income tax: usually resolved with a payment plan.
• State and sales taxes: every state has its own rules, and these can also lead to liens.

Should you borrow to pay the IRS? Sometimes yes, sometimes no. An IRS payment plan carries penalties and interest, but it usually costs less than fast financing with low credit. What many owners do is enter the IRS plan first and use financing as working capital to keep the business running and make the plan payments. Compare with your accountant before you decide.

Common mistakes: hiding the tax debt when you apply (it shows up in lien searches), stopping your filings because you cannot pay, and taking several financing products to plug the tax hole. Filing on time even when you cannot pay in full avoids bigger penalties.

Our recommendation

First, organize the debt: file your returns and get into an IRS plan. Then, if you need capital to operate while you keep up with the plan, Merchant Fund Express, our recommended funder, reviews your sales and deposits: applying is free and does not impact your credit. If you can wait and want coaching, compare a local CDFI.

If your balance is large or includes payroll taxes, find a tax professional before you sign any financing. Prefer Spanish? Leer en español.