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Invoice Factoring

Invoice Funding: Why We Request Tax Documents Before Funding

By David Liles

taxes block on a calculator

No matter what form of funding you seek for your small business, you’ll likely need to provide tax information to secure the money. Invoice funding companies will ask you for a Tax Information Authorization (typically Form 8821 in the United States and Form T1013 in Canada), which provides permission to request your tax history. 

While a request for tax information might be concerning at first, rest assured that it is simply a common practice across the financial sector. 

Today, I’ll break down why your tax history matters and what else to expect through the application process. I’ll also explain why invoice funding can be an intelligent solution to addressing tax payments to the government.

Why Your Tax Documents Matter

Typically, when a financial institution is considering a loan to a small business, tax documents are critical to its decision. After all, tax returns offer a glimpse into the small business’ financial health, verify previous income, and show that you have fulfilled your obligations in both filing and payment. A small business funding company may want to see IRS Form 941 and CFA Form T1013 and examine your most recent quarterly payments. 

These documents will also tell a financial institution if you have any outstanding balance with the government. 

An invoice funding company is interested in any existing balance with a government entity. After all, a government has the right to levy your assets. An existing payment owed to the agency supersedes any contract that you might reach with a funding company.

If you have not paid your outstanding tax bill, a tax agency can place a lien – a security interest over assets that are used as collateral for funding. This lien would make it possible for the government to collect your accounts receivable. This would make a small business unable to fund invoices. 

We’re Here When You Need Us

Consider FundThrough a resource when it comes to your tax obligations and payments. We can discuss issues related to how the IRS or Canada Revenue Agency might impact your funding sources. 

FundThrough’s invoice factoring services can also allow you to stay ahead of your taxes by advancing against your receivables which can help you avoid hefty fines from the tax agencies. 

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