IRD instalment arrangement vs business loan: which is right for you?

When you owe Inland Revenue and can't pay it all by the due date, there are two main ways forward: agree an instalment arrangement with IRD, or borrow to pay the debt in full. Neither is automatically right. The best choice depends on how much you owe, how steady your income is and how much of your monthly cash flow you can afford to hand over. This guide compares an IRD instalment arrangement with a business loan side by side, with practical questions to help you decide.

Inland Revenue itself encourages people who can't pay to set up an instalment arrangement, and its January 2026 campaign on overdue GST and employer debt says the aim is to resolve debt through full payment or an arrangement. So whichever path you choose, the one option that doesn't work is doing nothing.

What is an IRD instalment arrangement?

An instalment arrangement is an agreement with Inland Revenue to pay your tax debt in regular amounts over time, rather than all at once. You can apply in myIR, choosing an amount, a payment frequency and a start date.

A few points are worth knowing before you apply:

• Inland Revenue charges interest on overdue amounts, and that interest is included in your instalment amounts.
• Making regular agreed payments means you'll pay fewer penalties than if the debt simply sat there, according to IRD.
• IRD reviews each request. It may approve it, ask for more information or contact you to discuss other options.
• The arrangement covers the debt you have now. You still need to file and pay new returns on time as they fall due.

In short, an arrangement slows the cost of tax debt and takes the heat out of collection, but the debt and the interest remain until the last instalment is paid.

What is a property-secured business loan for tax debt?

A property-secured business loan is finance secured by a mortgage over New Zealand real estate, used to pay Inland Revenue in full. The loan is then repaid on agreed terms, often through a sale, a refinance, a contract payment or business cash flow.

With fundU, loans run from $20,000 to $1m for business purposes. We can lend on a first mortgage, or on a second mortgage behind your existing bank loan so the bank lending stays in place. Repayments can be interest-only, capitalised (no scheduled monthly repayments during the term) or principal and interest, depending on the approved terms. That flexibility is the main difference from an arrangement: it can take the monthly pressure off entirely while the business recovers.

Instalment arrangement vs business loan: how do they compare?

Here is a side-by-side view of the two options on the things that matter most to business owners.

Factor	IRD instalment arrangement	Property-secured business loan
Who you owe	Inland Revenue	Your lender (IRD is paid in full)
Security needed	None	A mortgage over New Zealand property
Interest and penalties	Interest continues; penalties reduced when payments are kept	IRD interest and penalties stop on the cleared balance; the loan is priced on your circumstances
Monthly cash flow	Regular instalments start straight away	Can be interest-only or capitalised, with no scheduled monthly repayments
Approval	Decided by Inland Revenue	Decided by the lender, based on property, purpose and exit
Speed	Apply online in myIR	Funding in as little as 24 hours once approved, in some cases
Risk if things go wrong	Missed instalments bring IRD contact back	The property is security, so a clear exit plan matters
Best for	Smaller debts, steady income	Larger arrears, lumpy cash flow, owners who own property

Neither column is "good" or "bad". An arrangement costs nothing to set up and needs no security. A loan clears the debt completely and can be shaped around your cash flow. The right answer is whichever one you can actually sustain.

When does an instalment arrangement make the most sense?

An arrangement is usually the better fit when the debt is manageable relative to your income and you're confident you can keep every instalment going. Signs it could suit you:

• The balance is modest and could realistically be cleared within your normal trading cycle.
• Your income is steady and predictable, with no big seasonal dips ahead.
• You're current with your returns and can keep paying new tax as it falls due.
• You don't own property, or you'd rather not offer property as security.
• The debt came from a one-off event that's now behind you.

If that sounds like your situation, an arrangement is a sensible, low-cost step. Apply early, offer an amount you can sustain, and set up a direct debit so you never miss one.

When does a business loan make more sense?

A loan usually wins when the debt is too big, or your cash flow too uneven, for regular instalments to work without starving the business. Signs a loan could suit you:

• The arrears are large and still growing, often across several tax types.
• Monthly instalments would eat into wages, stock or supplier payments.
• Your income is seasonal or tied to big contract payments, so fixed instalments don't match how money comes in.
• You've already had an arrangement fall over, or IRD has declined your proposal.
• You own property with equity and have a clear plan to repay, such as a sale, a refinance or an upcoming payment.
• You want IRD paid in full so you can get on with running the business.

For the practical steps, see our guide on how to pay off IRD debt with a business loan, and our IRD tax debt loans page for how fundU approaches it.

Can you use an arrangement and a loan together?

Yes, and it's often the smartest approach. The two aren't mutually exclusive, and combining them can give you protection now and a clean slate later.

Common ways owners combine them:

1. Arrangement first, loan second. Set up an arrangement in myIR straight away to show good faith and slow penalties, then pay the remaining balance out with a property-secured loan once it settles.
2. Loan to rescue an arrangement. If you're struggling to keep instalments going, a loan can pay the arrangement out before it falls over.
3. Loan for the big debt, arrangement for the tail. Occasionally a smaller balance that arises after settlement can be handled with a short arrangement while the business settles into its new routine.

Whichever combination you use, keep Inland Revenue informed. Telling them you have finance in progress, with a realistic settlement date, is far better than letting them find out from a missed payment. Our guide on how to talk to creditors and buy time has tips for those conversations.

How do you apply for an instalment arrangement in myIR?

The process is online and fairly quick if you're prepared. Inland Revenue says you'll need three things before you start: how much you can afford, how you'll pay, and when you want payments to begin.

1. Log in to myIR and review every tax account so you know the full balance.
2. File any overdue returns, so the debt you're arranging is the complete picture.
3. Work out what you can genuinely afford each week, fortnight or month after wages, rent, suppliers and new tax.
4. Choose direct debit if you can. It's the easiest way to make sure no instalment is missed.
5. Pick a realistic first instalment date that lines up with when money comes in.
6. Submit the request, then watch for IRD contacting you in myIR or by phone with a decision, a request for more information or a discussion of options.

Offer an amount you can keep paying in your leanest month, not your best one. An arrangement that falls over after a few months leaves you back where you started, with less goodwill.

How does each option affect your bank and future borrowing?

Both options show you're dealing with the debt, which counts for a lot. The difference is what sits on your record afterwards and who you owe while you rebuild.

With an arrangement, the tax debt stays on your IRD account until the final instalment. If you apply to a bank for a new loan or overdraft during that time, expect questions about it, and some banks may prefer to wait until it's cleared. With a property-secured loan, Inland Revenue is paid out and your IRD account shows a nil balance, but you now have a mortgage to repay through your exit plan.

For many owners, the cleanest route back to bank lending is a short-term loan that clears IRD, a run of on-time tax payments and then a refinance to a bank. If a bank has already said no, our page on business loans after a bank decline explains how fundU looks at things differently. Whichever route you take, check your credit file with the credit reporters, Centrix, Equifax and Experian, so you know what a future lender will see.

Five questions to help you decide

If you're still weighing it up, work through these honestly, ideally with your accountant.

1. How big is the debt compared with your monthly surplus? If instalments would take most of your spare cash, a loan with interest-only or capitalised repayments may be kinder to the business.
2. Is your income steady or lumpy? Fixed instalments suit steady income. Seasonal and contract-based businesses often struggle with them.
3. Is the debt still growing? If you're falling further behind each month, an arrangement alone may not stop the slide.
4. Do you own property with equity? Without property, a secured loan isn't an option with fundU, and an arrangement is the natural path.
5. What's your exit? A loan needs a clear repayment plan. See our guide on the exit strategy for short-term business loans.

Example scenario

A Christchurch hospitality business owed about $95,000 in GST and employer deductions after a quiet winter. The owners set up an instalment arrangement in myIR, but the weekly amount was eating into wages and stock, and by spring they were struggling to keep up while also paying current tax.

The owners had a rental property in Canterbury worth around $720,000 with a bank mortgage of $380,000. A second mortgage of $120,000 paid the remaining arrangement balance to Inland Revenue in full and added a working capital buffer for the busy summer. Interest was capitalised, so there were no scheduled monthly repayments, and the planned exit was the sale of the rental the following year. This is an illustrative example only.

The flip side is just as real. A Nelson sole trader owing around $12,000 with steady monthly income would usually be better served by a short instalment arrangement than by borrowing at all.

Key takeaways

• An IRD instalment arrangement spreads tax debt over time; interest continues and is built into your instalments.
• A property-secured business loan pays Inland Revenue in full, so IRD interest and penalties stop on that balance.
• Arrangements suit modest debts and steady income. Loans suit larger arrears, lumpy cash flow and owners with property equity.
• You can combine them: an arrangement now, paid out by a loan when finance settles.
• Whatever you choose, keep filing and paying new tax on time and keep IRD informed.

Get help choosing the right path

If an arrangement isn't working, or the debt is too big for one to handle, a property-secured loan could give you a fresh start. fundU is a direct lender, so our own credit team makes the decision and there's no panel of lenders in the way. We can also provide working capital finance as part of the same loan to rebuild your buffer.

Read more about our IRD tax debt loans or start your enquiry. It's free, takes a couple of minutes and won't affect your credit score. You can also call 09 875 4577.