ERC loans can be a faster alternative to waiting on the IRS. Learn about the costs and determine if they are a good financial fit.
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On 11/14/23, IRS Commissioner Daniel Werfel announced that the IRS is updating its ERC review procedures and will begin processing new ERC claims in the near future following the moratorium implemented in September. Existing claims are still being processed and eligible businesses can still submit an ERC claim through reputable ERC specialists to be processed when the moratorium ends. Visit our full breakdown of the ERC pause for the latest information.
Does your business need fast access to your ERC refund? If so, an ERC loan might be right for you. But do the pros of getting an ERC loan outweigh the cons? Which businesses benefit from ERC loans? And when are you better off just waiting it out for the IRS to send your ERC refund check instead?
We’ll explain all of the advantages and disadvantages of getting an ERC loan so that you can feel confident about choosing if this funding option is right for you.
Table of Contents
An ERC loan is effectively an advance on your employee retention credit refund. Unlike a traditional business loan, an ERC loan doesn’t need to be repaid monthly. Instead, a taxpayer who has filed for the ERC credit can work with an ERC company to get an ERC “loan,” which means the company will provide you the funds for your ERC credit amount (minus a fee) so you don’t have to wait for the IRS to issue your refund.
This credit amount is usually paid back with one balloon payment once your ERC refund does come in, although some companies may purchase your ERC refund outright.
Most taxpayers who have claimed the ERC credit are eligible for an ERC loan, although certain factors like ERC credit amount, FICO score, credit report, and even business revenue could be taken into consideration. The best way to see if you qualify for an ERC loan is to work with an ERC loan provider. Read our full post on ERC loan qualifications to learn more.
Whether or not you should opt for an ERC loan is going to depend on your business’s situation, how quickly you need access to your ERC refund, and how strong your business profile is for alternative types of business funding.
The benefits of an ERC loan are:
Patience is a virtue and can pay off if you need access to your entire ERC credit, but time isn’t a luxury that every business has. If you need cash flow quickly and don’t want to go with (or don’t qualify for) traditional small business loans or lines of credit, then the ERC loan fees could be more than worth the trade-off.
If you choose to go with an ERC loan, make sure to check that the ERC loan company you work with is reputable, and never sign a loan agreement if there are any terms you are uncomfortable with or cloudy on.
Learn how to apply for an ERC loan in our complete guide, and check out our top ERC loan company suggestions.
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