Situation

Business funding with tax arrears with the cra: how it is read and what helps.

Money owed to the Canada Revenue Agency is read carefully because of the CRA's collection powers.

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How this is read

Money owed to the Canada Revenue Agency is read carefully because of the CRA's collection powers.

The CRA can take collection action such as garnishing accounts or receivables for unpaid amounts. A reviewer therefore asks about tax owed and whether a payment arrangement is in place.

What helps

A formal payment arrangement with the CRA
Arrangement payments made on time
Current filings up to date
A clear plan to clear the balance

What hurts

No arrangement and growing arrears
Recent collection action on the account
Unfiled returns

A sensible plan

Get filings current and set up a payment arrangement before applying if you can. Disclose the balance and the arrangement. Hiding it rarely works and can end a review late in the process.

Illustrative arithmetic

A renovation contractor depositing about $70,000 a month asks for $20,000 to clear a remittance balance. At a 1.25 factor the payback is $25,000, a cost of $5,000. Over roughly 5 months that is about $238 per business day, or close to 7% of monthly deposits.

Total payback: $25,000.
Cost: $5,000.
Payment: about $238 per business day, close to 7% of monthly deposits.

Every figure on this page is illustrative arithmetic in Canadian dollars. It is not an offer, a quote or a promise of approval.

Typical starting points

Monthly revenueTypically from around $20,000 a month in deposits for Canadian files. The exact line varies by funder and by file.

Time in businessTypically about 12 months. Newer businesses can be reviewed, but the options narrow.

Account healthLimited low-balance or negative days. Funders read the last few months of bank statements for this.

CreditScores from 500 are considered. A score of 600 or higher opens more options and better offers.

DocumentsA signed application and recent business bank statements, typically the last four months.

Existing advancesFiles with an existing advance can be reviewed, including second position.

One more thing that helps

Penalties and interest on CRA balances keep growing, so a clear plan to pay them off can strengthen a file rather than weaken it. Talk to your accountant first; in some cases the CRA's own arrangements are cheaper than any funding.

Practical tip

Keep a copy of your payment arrangement and recent confirmations that payments were made. These documents answer the most common questions quickly.

What to send with your application

The payment arrangement letter
Confirmation of recent arrangement payments
Proof that current filings are up to date

Common questions

Will tax arrears stop a review?

It varies by funder and file. An arrangement in good standing is read very differently from unmanaged arrears.

Should I use funding to pay the CRA?

Sometimes, if it ends penalties and interest and the payment fits cash flow.

Do I need to disclose it?

Yes. Be upfront.

Keep reading

Underwriting situationsCredit, NSFs, time in business and more Funding requirementsTypical starting points for Canadian files Documents you needWhat to have ready before you apply Bad credit business fundingHow files with weaker credit are read GlossaryPlain-language definitions

Educational information only. It is not legal, tax or accounting advice.

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