Guide · Tax liens and back taxes
Business Loans With a Tax Lien: What Gets Approved, What It Costs and How to Fix the File
A federal or state tax lien is one of the few things that can stop a business loan on its own. Banks and the SBA treat an unresolved lien as a hard decline; online lenders and revenue-based funders will often still fund, on terms that depend on whether the lien is in a payment plan, how big it is relative to revenue, and whether the IRS has filed a Notice of Federal Tax Lien at all. This guide covers what each type of lender does with a lien in October 2026, what the financing costs, and the sequence that gets a lien off the file for good.
Can You Get a Business Loan With a Tax Lien?
Yes, from some lenders. With a filed federal or state tax lien, banks and SBA lenders decline until the lien is released or subordinated; the SBA requires delinquent federal taxes to be in an approved installment agreement and current, and most bank lenders want the lien gone. Online term and line-of-credit lenders generally approve with a lien under about $50,000 when it is in an IRS installment agreement with three or more payments made, at 600+ credit and $20,000 or more a month in deposits, usually with a shorter term and a higher rate. Revenue-based financing approves with a lien in a payment plan, and sometimes without one, from 500 credit, a year in business (sometimes six months) and $20,000 a month in deposits; a few funders will fund an advance specifically to pay the lien off, because the release improves their own position. Equipment financing is often available regardless of the lien because the equipment secures it. The fastest path for most owners is: set up an installment agreement, make three payments, then apply, and use the proceeds to pay the lien and refinance into cheaper money once it is released.
What Each Lender Does With a Tax Lien
| Lender type | Unresolved lien | Lien in installment agreement | Lien released (within 2 years) | Typical terms with a lien |
|---|---|---|---|---|
| Bank term loan or line | Decline | Usually decline; some consider under $25K | Approve; may ask for proof of release | Standard pricing once released |
| SBA 7(a) / Express | Decline | Eligible if the agreement is approved and current (IRS Form 433-D or online plan) | Approve | 10.00% – 13.50%; full package |
| Online term loan | Decline over ~$25K | Approve under ~$50K with 3+ payments made | Approve | 18% – 36% APR, 6 – 18 months |
| Online line of credit | Case by case | Approve under ~$50K, smaller limit | Approve | 2% – 3% per draw |
| Revenue-based financing | Approve at lower amount or with lien payoff from proceeds | Approve | Approve | Factor 1.25 – 1.45, 4 – 10 months |
| Equipment financing | Often approve; equipment is collateral | Approve | Approve | 12% – 24%; may want 10% down |
| Invoice factoring | Approve if the IRS has not levied receivables; factor may require a subordination | Approve | Approve | 1% – 4% per 30 days |
Credit-tier rules that apply on top of the lien are in bad credit business loans and business loan requirements.
What Underwriters Look At When There Is a Lien
- Filed or unfiled. A balance owed to the IRS is not a lien until a Notice of Federal Tax Lien is filed (generally once the balance passes $10,000 and the IRS has sent notices). An unfiled balance shows up as a tax-debt question on the application, not as a public record, and is treated far more leniently.
- Size against revenue. A $20,000 lien on $60,000 a month in deposits is a nuisance; a $150,000 lien on the same deposits is a decline almost everywhere except an advance structured to pay it.
- Installment agreement and payment history. Three to six on-time payments on an IRS or state plan turn most online declines into approvals. Bring the agreement letter and the payment confirmations.
- Payroll (941) versus income tax. Unpaid payroll taxes are read as the business using employee withholdings to operate, and the trust-fund penalty attaches to the owner personally. Lenders are stricter about 941 liens than 1040 or 1120 balances.
- Levies and garnishments. An active levy on the bank account or receivables is a decline until it is released; factors in particular will not buy invoices the IRS can take.
- State liens. State sales-tax and withholding liens are treated like federal ones; some states file faster and at lower balances, so check the state record too.
Share of applicants fully approved, by product (Federal Reserve, 2026)
81% of applicants were approved for at least part of the request. Source: Federal Reserve Banks, 2026 Report on Employer Firms.
What Financing Costs With a Lien on the File
A $50,000 need, four ways, for a business depositing $45,000 a month with a $30,000 federal lien in an installment agreement:
| Option | Pricing | Term | Payment | Total cost | Notes |
|---|---|---|---|---|---|
| Revenue-based financing, lien paid from proceeds | Factor 1.32 | 8 months | ~$390/business day | $16,000 | Funder requires $30K paid directly to the IRS at funding; release in 30 days |
| Online term loan | 30% APR + 4% origination | 12 months | $4,880/month | $10,560 | Approved because 4 plan payments made; rate drops ~8 points once released |
| Equipment financing (if the need is equipment) | 16% | 4 years | $1,418/month | $18,060 | Lien largely ignored; equipment is the collateral |
| Online term loan after release | 22% APR | 18 months | $3,230/month | $8,140 | Same lender, 60 days later with the release recorded |
Total cost of $50,000 with and without the lien
Illustrative at October 2026 pricing. The lien costs roughly 8 to 10 APR points on online products; paying it off and refinancing usually recovers that within a year.
Run your own figures in the payment calculator and factor rate calculator.
How to Get the Lien Off the File
- Get the exact balance and the lien status from the IRS online account or a tax transcript (Form 8821 lets a tax professional pull it); confirm whether a Notice of Federal Tax Lien has been filed and in which county.
- Set up an installment agreement (online for balances under $50,000; Form 433-D or a tax professional for larger balances) and make the first payments on time. Ask about a direct-debit agreement, which the IRS treats more favorably.
- If the balance is under $25,000 and in a direct-debit agreement, request lien withdrawal (Form 12277) after three payments; the IRS can withdraw the notice even before the balance is paid.
- Fund the payoff where it makes sense: an advance or term loan sized to clear the lien, with the funder paying the IRS directly at closing, so the release is recorded within 30 days.
- Once the release or withdrawal is recorded, refinance the expensive money into a line of credit or term loan at the lower rate the clean file now qualifies for; see business debt consolidation calculator.
- Keep payroll deposits current from here on; a second 941 lien within two years is the hardest file to place.
For an SBA loan specifically, the lender will want the installment agreement, proof the last twelve months of payments were made and current-year taxes filed; the full list is in SBA loan requirements.
How RAN Funding Places Files With a Tax Lien
Lien files are placed every week. A specialist reads the lien letter, the installment agreement and three months of statements, presents the file to the best-matched funders in our network for the best deal (including funders that will pay the lien directly at closing), and shows you the approvals side by side with total payback. We also tell you when waiting 30 days for a withdrawal would cut the cost in half.
Common Questions
Does a tax lien show up on a business loan application?
A filed Notice of Federal Tax Lien is a public record that appears on business credit reports (Experian, Dun & Bradstreet, Equifax Business) and in lender public-record searches; it no longer appears on personal consumer credit reports since 2018. Most applications also ask directly whether you owe back taxes, and lenders verify with bank statements and, for larger loans, tax transcripts.
Can I get an SBA loan with a tax lien?
Only if the delinquent taxes are in an approved installment agreement that is current, the lien is subordinated or the plan is documented, and current-year returns are filed. An unresolved lien or a defaulted agreement is a decline.
Will a lender pay off my tax lien directly?
Some revenue-based funders and term lenders will disburse part of the proceeds to the IRS at closing and fund the rest to you, because a released lien improves their collateral position. Ask for this structure if the lien is the main reason for the loan.
How long after a lien is released can I get a bank loan?
Banks usually want the release recorded and 12 to 24 months of clean filings and payments; online lenders and SBA lenders typically accept the file as soon as the release is recorded.
What is the difference between a tax lien and a tax levy?
A lien is a claim against your assets that secures the debt; a levy is the IRS actually taking assets (bank funds, receivables, wages). Lenders will work around a lien in a payment plan; an active levy stops nearly every product until it is released.
Is RAN Funding a lender?
No. RAN Funding is a business financing broker. We present your application to the funders in our network that fit your profile and show you the approvals that come back; the funding partner sets the approval, amount, rate, fees and terms. RAN Funding is paid by the lender, not by you.
Sources
- Understanding a Federal Tax Lien — Internal Revenue Service
- Payment Plans, Installment Agreements — Internal Revenue Service
- SOP 50 10 (lender and development company loan programs) — U.S. Small Business Administration
- 2026 Report on Employer Firms: Findings from the 2025 Small Business Credit Survey — Federal Reserve Banks
- H.15 Selected Interest Rates (bank prime loan rate 7.00%) — Board of Governors of the Federal Reserve System
See What You Qualify For
One application, about five minutes, soft pull only. A funding specialist tells you up front which products fit your file, what they cost and how fast each one funds.