Guide · Difficult situations
Can you get business funding with a tax lien?
By Alex Makowski Published
Often yes, and it is far more common than people expect. What decides it is not the lien's existence but whether you are in an agreed payment plan and are keeping to it. An undisclosed lien discovered during underwriting kills applications; a disclosed lien with a plan attached frequently does not.
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01
Why funders care
A federal tax lien sits ahead of most other claims on your assets. A funder taking a UCC filing behind one knows its security is worth considerably less.
It also signals a period of cash-flow difficulty, which underwriting will want explained rather than hidden.
The size relative to your revenue matters more than the raw number. A $12,000 lien against $80,000 of monthly deposits is a very different file from a $200,000 one.
02
What makes it workable
An agreed instalment arrangement, and evidence of payments made under it. This is the single most important document you can put in front of an underwriter.
A subordination agreement, where the taxing authority formally steps behind the new funder. It is a real process with real timelines, so start it early if the amount is large.
Consistent recent deposits. Evidence that the difficulty which produced the lien is behind you does more than any explanation.
03
How to approach it
Disclose it at application. It will be found — liens are public record and appear in underwriting searches — and disclosure is the difference between a manageable fact and a credibility problem.
Get on a payment plan first if you are not on one. The IRS publishes the arrangements available, and being in one changes the conversation completely.
Have the paperwork ready: the notice, the plan, and proof of the last few payments.
Expect a smaller amount or a higher rate rather than a flat refusal, particularly from revenue-based funders who are underwriting deposits.
Written by
Alex Makowski, Owner
Alex Makowski owns and runs Business Loans for America and has been placing funding for U.S. small businesses since 2021. Businesses he has worked with have secured $50M+ in financing across 1,200+ placements. He writes and reviews every guide on this site.
FAQ
Related questions.
- Does a state tax lien count the same?
- Broadly, yes — funders treat state and federal liens similarly, though priority rules differ. Disclose both.
- Can I get funded to pay the lien off?
- Sometimes, and it can be a sound use. Compare it against an instalment arrangement, which is often cheaper if you qualify for one.
- Will the lien show up if I do not mention it?
- Almost certainly. They are public record and standard in underwriting searches, which is why disclosure costs nothing and concealment costs the application.
Guides
More on difficult situations
After a default
Harder, not impossible — settled beats outstanding, every time.
Sole proprietors
Yes — but the business bank account is close to non-negotiable.
UCC filings
A public notice that a funder has a claim on your assets.
Personal guarantees
Nearly always — and it is the term that outlives the business.
Sources
- IRS — Small Business and Self-EmployedFederal tax guidance for small businesses, including recordkeeping and deductions.
- Consumer Financial Protection BureauFederal consumer-finance regulator. Publishes guidance on credit terms and disclosure.
- U.S. Small Business Administration — LoansFederal loan programmes, eligibility and what the SBA does and does not guarantee.
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