Whenever spring rolls around people start thinking about taxes. While it’s possible to get a factoring company to finance a business with tax problems, the difficulty is determining how far the problem has traveled though the IRS process. If the tax deficiency is a rather minor one and the business has not had a history of delinquencies, then it probably can be safely handled by mail correspondence where you commit to paying the outstanding amounts plus all penalties and interest.
If the problem has been going on for a while and the business is not really responding to frequent letters from the IRS, eventually an agent will be assigned. Again if it’s a relatively recent situation and you can convince the agent that you plan to clear it up in short order often they will cooperate as long as commitments are met. But failure to meet your commitments with the IRS will inevitably end up with an IRS lien against your company (including all accounts receivable).
If a lien is placed on a business, then a payment plan has to be negotiated. Once the payment plan is in place the factoring company will make the payments directly to the IRS out of your advance. Because that is the only way the IRS will subordinate their lien to a finance company in order to get invoices financed. The IRS understands that a company needs capital to survive, but if they are dealing with a company that shows a pattern of chronic delinquency then they are less likely to subordinate their position on all the company assets.
At the final table game of collateral, an IRS lien trumps all hands – it’s the Royal Straight Flush. So borrowing (not paying taxes) from the IRS is the worst hand you can play. Never use the IRS as your funder, it doesn’t pay.
Avoid using unpaid taxes to finance your business – get outside capital to grow HERE.