The short answer
An IRD debt loan is business finance used to pay your Inland Revenue debt in full. Once IRD is paid, late payment penalties and use-of-money interest stop growing and collection action ends. You then repay the lender over an agreed term. LoansOne arranges unsecured loans and 1st or 2nd mortgages from $20,000 to $500,000 for this.
How does an IRD debt loan work?
An IRD debt loan is simply business finance with one job: pay Inland Revenue in full. A lender advances the money, it goes to IRD (often directly), and your tax account drops to zero. From that point you owe a private lender instead of the Crown, on a repayment schedule agreed upfront.
That swap matters more than it looks. Inland Revenue is a creditor with powers no supplier has. It can take money straight from your bank account through a deduction notice, report large business debts to credit reporting agencies, and apply to put a company into liquidation. A lender has none of those tools. You get a fixed term, a known repayment and, most importantly, a clean IRD account.
LoansOne arranges two main ways to do this:
- Unsecured business loans from $20,000 to $500,000, assessed mainly on your trading and bank statements. No real estate security is required in most cases.
- Fast and flexible 1st or 2nd mortgages from $20,000 to $500,000 for business purposes. No cash flow or financial records needed, and bad credit is OK.
Whichever suits you, the steps are the same: you apply, an expert reviews the file, a matched lender makes contact, and funds can land as soon as the next day.
Why paying IRD early saves money
Tax debt does not sit still. Inland Revenue adds charges from the day after the due date, and they keep building until the balance is cleared.
| Charge | When it applies | What it means for you |
|---|---|---|
| Late payment penalty | 1% the day after the due date | Hits as soon as you are late |
| Second late payment penalty | 4% on day 7, on the unpaid tax plus penalties | The bigger jump comes a week later |
| Monthly penalty | 1% each month unpaid, for some tax types (not GST or income tax) | Applies to PAYE and other employer deductions, among others |
| Non-payment penalty | 10% of overdue employer deductions, repeated monthly | Reduces to 5% if you pay or enter an arrangement |
| Use-of-money interest | Charged daily from the day after the due date | Continues until every dollar is paid |
IRD may give a grace period if it is your first late payment in two years, and it does not charge penalties on unpaid tax of $100 or less. Use-of-money interest is calculated daily and does not compound, and IRD confirms it is deductible for business purposes. Even so, it keeps running on the full balance for as long as the debt stays open.
Want to see what your debt is likely to cost if it sits for another six or twelve months? Run your numbers through the IRD debt calculator.
IRD instalment arrangement vs business loan: which costs less?
Inland Revenue does offer instalment arrangements, and for some businesses they are the right call. IRD says regular agreed payments mean you pay fewer penalties. It also says it keeps charging interest on overdue amounts, and that interest is built into your instalments. If you pay regularly without a formal arrangement in place, you can still be charged penalties and interest at the full rate.
Here is how the two options compare in practice:
| IRD instalment arrangement | Business loan to clear IRD | |
|---|---|---|
| IRD balance | Stays open until the last instalment | Cleared in full on settlement |
| Interest | IRD’s use-of-money interest keeps running | Lender’s interest, priced on your circumstances |
| Penalties | Reduced while you stick to the plan | Stop, because the tax is paid |
| If you miss a payment | IRD can resume collection action | Dealt with by your lender under the loan terms |
| Effect on future dealings with IRD | You remain a debtor on IRD’s books | A clean tax account |
| Paperwork | Affordability details, sometimes a 12-month cash flow forecast | Bank statements, IRD statement, ID, plus property details if secured |
| Speed | Depends on IRD’s assessment | Next-day funding possible |
The honest answer is to compare total cost over the same period. Add up the interest and penalties you expect under an arrangement, then compare that with the full cost of a loan, fees included. Our compare loan offers tool helps you line them up side by side. Every LoansOne loan is priced on your individual circumstances, and the team works to get you the sharpest rate available for your situation.
One more point worth knowing: when a company applies to IRD for financial relief, IRD’s form asks whether the business has tried getting a loan to pay the debt. Borrowing to clear tax is a normal, recognised step.
Which loan suits your tax debt?
The right structure depends mostly on two things: whether you own property, and how quickly you can repay.
- No property, steady trading: an unsecured business loan assessed on your bank statements. Good for debts at the smaller end, or where turnover is strong but timing went wrong.
- You own property and want the bank left alone: a second mortgage sits behind your existing bank loan, so your 1st mortgage stays untouched. No cash flow or financial records needed.
- Bigger debt or the bank is the problem: a private first mortgage can refinance the bank and clear IRD in one go.
- Very short timeframe: a caveat loan can be quick where the plan is to repay from a sale or refinance within months.
If you are not sure which fits, the loan matcher gives you a starting point in a couple of minutes, or simply apply in about 30 seconds and an expert will tell you straight.
What lenders look at when you owe IRD
Lenders who fund tax debt are not shocked by it. They see it every week. What they want is a clear picture.
- Are your returns filed? Unfiled GST or income tax returns are the biggest hold-up. Get them in, even if you cannot pay yet, so the debt is a known number.
- How did the debt build up? A bad season, a big customer paying late or a growth spurt that ate cash flow are all common stories. Be upfront.
- Is the business trading well now? Recent bank statements showing healthy deposits carry a lot of weight on unsecured loans.
- What security is available? Property equity opens up larger amounts and is the main path where credit history is patchy. Check your position with the equity calculator.
- Is there a plan to stay current? A lender will feel more comfortable if you can show how GST and PAYE will be put aside going forward.
Two examples of how it plays out
A Hamilton earthmoving contractor. Two big subdivision jobs paid late, GST went unpaid for two periods and the end-of-year income tax bill landed on top. The balance was around $140,000 and growing. The owner had no wish to refinance the family home with the bank, so a second mortgage behind the existing bank loan cleared IRD in full. The business now repays one lender on a set schedule, and the IRD letters have stopped.
A Wellington café. A slow winter left the owners behind on PAYE and GST, roughly $45,000 in total. They did not own property. Their bank statements showed steady daily card takings, so an unsecured loan was arranged and paid straight to Inland Revenue. Clearing PAYE quickly was the priority, as unpaid employer deductions attract their own penalties and IRD treats them seriously.
These are illustrative scenarios, not real clients. Your options will depend on your own numbers.
What to have ready
Having these on hand speeds things up:
- Your latest Inland Revenue statement from myIR showing the full balance
- Three to six months of business bank statements
- Photo ID for directors or owners
- Property details if you want a secured loan (address, current lender, rough value)
- A short note on what caused the debt and how you will stay on top of tax from here
Not sure you are ready? The loan readiness check shows any gaps before you apply. If GST or PAYE is the main problem, our page on GST and PAYE debt loans goes deeper, and if you want a full rundown of IRD’s own options first, read how to pay IRD tax debt.
Why use LoansOne for tax debt?
- No credit file mark on enquiry. Starting an application does not mark your credit file.
- Not shopped around. Your file is not sprayed to dozens of lenders. An expert reviews it and matches you to the right lender for your situation.
- Secured and unsecured options from $20,000 to $500,000, including when the bank says no or is too slow.
- Bad credit considered, especially on property-secured loans.
- Fast decisions, with funding in as little as 24 hours in many cases.
Next step
Every week a tax debt stays open, it costs you more and IRD’s options against you grow. Clearing it now puts you back in control. Apply online in about 30 seconds, free and with no mark on your credit file, or call the team on 09-888 5252 to talk it through.
