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  • Writer's pictureThe Loan Dealer Crew

Navigating the Ugly Business of Tax Liens: What Every Business Owner Should Know

Updated: Feb 26

Running a business often means facing unexpected challenges, and one of the most daunting can be dealing with tax liens. Imagine this scenario: Your firm finds itself in hot water with the IRS, owing back taxes amounting to five or even six digits. Suddenly, your restaurant, complete with its equipment and the building it's called home for 35 years, is under threat of seizure due to a tax lien. You've got just ten days to settle the debt before the IRS takes action, leaving your assets vulnerable to levy.

It's a nightmare scenario most of us would rather avoid, but understanding the ins and outs of tax liens is crucial for any business owner. Here's a breakdown of what you need to know:

What Happens When You're Slapped With a Tax Lien?

When a tax lien goes unpaid, the government has the authority to seize your assets, including real property and bank accounts, until the debt is satisfied. This places the IRS at the front of the line when it comes to getting paid, leaving other creditors waiting in the wings.

How Does a Tax Lien Affect Your Business Plans?

In the past, a tax lien would tarnish your business credit report, making it difficult to secure financing. However, recent changes mean that major credit bureaus no longer include tax lien data in their reports. While this may seem like a reprieve, tax liens remain a matter of public record, signaling red flags to potential lenders.

Before seeking business funding, it's essential to address any outstanding tax lien obligations. Failure to do so could result in higher interest rates and hindered cash flow, impacting your ability to repay both the government and new creditors.

How Can You Navigate the Road To Approval For a Business Loan?

Despite the risks associated with tax liens, there are options available to mitigate them. The IRS offers pathways such as subordination and withdrawal, which can reduce the perceived risk for lenders.

Subordination removes the government's priority in repayment, making your business a less risky investment. Meanwhile, withdrawal eliminates the public notice of the tax lien, presenting a more favorable scenario for businesses in debt.

"A tax lien doesn't spell the end of your chances to secure business funding. However, there are additional steps that need to be taken to ensure the successful completion of your funding application process." - Margarly Jimenez, Fundu Account Executive

Can You Prevent a Tax Lien Altogether?

Yes, there are steps you can take to avoid the drastic measures of a tax lien. Working with the IRS to establish alternative payment arrangements, such as installment plans or offers in compromise, can help alleviate the burden of tax debt.

Educate yourself on the options available and the implications of each decision. Ignoring IRS communications or legal claims could compound your financial woes.

In Conclusion:

Dealing with tax liens is a complex and often stressful aspect of business ownership. By understanding the process and taking proactive steps to address tax obligations, you can navigate these challenges with greater confidence.

For businesses seeking financial solutions, fundu offers working capital options to support growth and stability. With over $4 billion distributed to 45,000 businesses since 2010, fundu stands ready to help your business thrive. Contact us today for more information on how we can assist you.

Navigating the complexities of tax liens is a daunting task, but with the right knowledge and resources, you can overcome these obstacles and get back to business as usual.

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