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Taxi (Business Funding) Review

Taxi gives businesses easy access to working capital at about half the rate of a big bank overdraft. Our review explains the fees, interest rates, pros and cons, must-know considerations and frequently asked questions to help you decide if Taxi is right for your business.
Updated 2 December 2024
Summary
  • Business lending is all too often expensive (with high interest rates), risky (with personal guarantees), time-consuming (with lengthy applications), and generally difficult to arrange.
  • Our review of business loans outlines the options; the banks don't seem interested in helping SMEs with loans. This means the options are limited, and the decline rate is high among small businesses looking for working capital, lines of credit, or help with cash flow management. 
  • Taxi, a service from the well-established Tax Traders, is an innovative funding service that allows small businesses to borrow against their provisional tax payments. It provides a flexible and affordable alternative to traditional business loans.
  • Taxi is the first nationwide company to offer a business funding service supported by tax pooling. It allows businesses to borrow up to 90% of their provisional tax payments made in the previous 12 months. If your provisional tax payments were $50,000, you can borrow up to $45,000 and be charged an arguably low facility fee and interest rate. 
  • After linking your MyIR account and making the provisional tax payment through Taxi, funds are accessible the next working day.
  • It’s important to clarify that Taxi does not give you your tax back. Instead, your provisional tax payment is securely held and used as collateral to access business funding. The funding Taxi provides is completely separate from the tax payment you’ve made.
  • By leveraging your tax payments, Taxi enables you to unlock flexible, low-cost business funding, but your tax obligations remain intact. This allows you to get the working capital you need without touching the tax payment itself.

To explain what you need to know about Taxi and help you decide whether it's right for your business funding needs, our guide covers:
​Profitability requirement: Taxi is only available to businesses that are already paying provisional tax, which means it's not suitable for startups, historically unprofitable businesses, and those facing long-term adverse trading conditions. This limits access for businesses that may need funding but don't yet have enough income to trigger provisional tax obligations.

AIM taxpayers: Businesses using the Accounting Income Method (AIM) are not eligible to use Taxi. However, less than 1% of provisional taxpayers use AIM, and those interested can switch methods with their accountant’s guidance (Taxi never gives financial or tax advice). 

Disclaimer: MoneyHub may receive a commission when you use our referral code to sign up for Taxi's services. This helps support our website and ongoing research. This relationship does not affect our review; our findings and opinions are based on independent assessments.

Our Partnership with Taxi
  • We're thrilled to partner with Taxi to offer an attractive 10% discount on monthly facility fees. Whether you're looking to boost your cash flow or manage your business finances more effectively, Taxi's flexible solutions can help.
  • Use referral code TAN9 to claim your discount and enjoy improved cash flow management while saving on business funding costs, as our review explains. ​​
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Taxi's Fees, Interest Rates and Loan Terms

Taxi charges interest and fees, as explained below:

1) Interest rate: Taxi charges 7.09% p.a. on all funds accessed from your Taxi account. The comparable amount that banks charge is significantly higher. For example, Kiwibank's business account charges over 12% p.a., while ANZ charges around 15% p.a.  

Taxi's business funding facility charges a facility fee (see below) monthly, and the money you draw down must be cleared to zero within nine months.

2) Monthly facility fee: This is billed at 0.15% of your facility limit; it's usually 90% of your provisional tax payments over the last 12 months. The fee is calculated monthly based on your Taxi facility limit, and there is a minimum $29.90 per month charge, billed monthly in arrears. We calculate $29.90 as the facility fee for a $20,000 facility. This facility fee allows you to access funds at Taxi's 7.09% p.a. Interest rate. 

Please note that you'll pay the facility fee even if you don't access funds. If you want to lower the facility, you can do that by contacting Taxi's support team. For example, if you were entitled to a $50,000 facility but only wanted to make $20,000 available, you would save around $540/year in facility fees. 

Flexible terms: Taxi allows funding for up to nine months at a time. The interest rate costs are paid upfront. However, helpfully, Taxi credits a rebate against your prepaid interest if you repay early, with no penalty for doing so.

Important: Taxi does not require personal guarantees, financial disclosures, statements, or documentation. This is because your provisional tax payments provide the security for your funding limit, and no other security is required. Furthermore, Taxi doesn't require lengthy loan applications, financial accounts, accountant certificates, or audited statements. Simply having paid your provisional tax through your Taxi account is all that's needed to borrow money for business funding.​
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Provisional Tax Payments Security and Tax Pooling Explained

Provisional tax payments made through Taxi are securely held by the Government-owned Public Trust in a tax pooling account at Inland Revenue. Your tax payments are collateral for any funds you borrow from Taxi. Because of this secure setup, businesses can access funding without needing to provide additional personal guarantees or financial statements, a very different situation from traditional business lending.

Tax pooling is an Inland Revenue-approved system that allows businesses to make provisional tax payments into a pooled account managed by a trusted intermediary. This system offers significant flexibility for businesses, enabling them to manage their tax liabilities more efficiently. By pooling funds, businesses can reduce the risk of underpayment penalties and even earn interest on overpayments. Tax pooling has proven to be a cost-effective way to manage tax obligations. Taxi's parent company, Tax Traders, has built its business around tax pooling, given its advantages over traditional methods of managing provisional tax. If your business has deposits in any NZ tax pool, these can be transferred to Taxi and you can get started right away – no need to wait until your next provisional tax date to start building up your Taxi balance.

Taxi leverages the tax pooling system to provide secure business funding. Using your provisional tax payments as collateral, Taxi allows a business to borrow up to 90% of the tax payments made in the previous 12 months. This innovative use of tax pooling allows for flexible, accessible, and low-cost business funding. We argue that tax pooling is widely unknown by most SMEs, but the entire process is fully compliant with IRD regulations and well-established. 

Taxi uses Tax Traders who meet the requirements set out in the Tax Administration Act 1994 to establish and maintain a tax pooling account. We asked Taxi to explain why tax pooling is popular with businesses all over New Zealand, and summarise their response below:

“New Zealand has a really unique tax system. Provisional tax, which isn’t a tax itself, but rather the means by which companies in New Zealand are required to pay their income tax, was designed to spread a business’s tax liability throughout the year – rather than getting hit with one big end-of-year tax bill. The problem is, this system requires a business to determine how much their end-of-year tax bill will be, and divide this into equal payments throughout the year. One of the problems with this system can be that this requires businesses to pay tax for profit that has not yet been realised. Tax pooling gives Kiwi businesses more flexibility around how they pay this tax, in line with their business needs.”
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Pros and Cons of Taxi for Everyday Businesses

Taxi offers affordable funding for businesses of all sizes. We outline the pros and cons of Taxi for a typical SME. 

Pros
  • Lower interest rates: Taxi's competitive interest rate of 7.09% p.a. is much cheaper than business loans offered by banks and specialist commercial lenders. It's also cheaper than business bank account interest rates and credit cards, which typically range between 15% p.a. and 25% p.a. 
  • Flexible repayment options: Businesses can skip repayments during the nine-month repayment period without incurring extra costs, provided they catch up within the term. Taxi also offers a rebate for prepaid interest if the funding is repaid before the end of nine months.
  • No personal guarantees: Taxi doesn't require personal guarantees, security over business assets or charges on personal assets. This makes it a safer funding option for business owners compared to some business loans.
  • No impact on your existing credit lines: Taxi funding is additive and complements your other lines of credit – having a Taxi facility will not eat into the existing credit availability your business might have with banks or other credit providers.
  • Flexible use of funds: Taxi doesn't ask what you'll use the funding for, so long as it's for business purposes; many businesses use it for expansion, purchasing machinery, managing delayed payments, navigating seasonal dips and general working capital needs.

​Cons
  • Profitability requirement: As stated above, Taxi is only available to businesses that are already paying provisional tax, which means it's not suitable for startups, businesses historically unprofitable and those facing long-term adverse trading conditions. This limits access for businesses that may need funding but don't yet have enough income to trigger provisional tax obligations.
  • Not suitable for all tax types: Taxi is only available to businesses paying provisional tax under the standard method, ratio, or estimation method. Businesses using the Accounting Income Method (AIM) are currently excluded, limiting accessibility for some.
  • Limited borrowing potential: Taxi allows businesses to borrow up to 90% of their provisional tax payments made in the last 12 months. However, our experience with business lending and funding suggests businesses often apply for amounts between $50,000 and $500,000. The funding won't be sufficient unless a business reports sizeable profits and, therefore, has made sufficient provisional tax payments. 
  • Short repayment window: Taxi offers flexibility, but the maximum loan term is nine months. This won't work for any business seeking longer-term funding options, as the repayment period is shorter than traditional loans or lines of credit.
  • Ongoing fees: While Taxi's interest rate is competitive, the facility fee, billed monthly, adds to the cost of borrowing. For smaller businesses, the minimum $29.90 monthly charge could be a factor to consider.
  • Provisional tax requirement: Businesses that don't have consistent or significant provisional tax payments may find Taxi less beneficial, as the borrowing capacity depends on past tax payments. This may not suit all business cash flow cycles, especially startups or businesses with fluctuating tax obligations.
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What Happens If a Business Can't Repay Some (or All) of the Funding?

If you’re worried you can’t repay your Taxi funding on time, speak to the team as soon as possible – the team is helpful and here to support your business. Letting them know you’re struggling to repay your Taxi funding before the 9-month term will allow them to see if there’s anything they can do to support you. Typically, if you consistently make your provisional tax payments through Taxi, you can have your repayment term extended by an additional 9 months. In such scenarios, no punitive fees are applied, but the prevailing interest rate will apply to any remaining balance for the extended period. Furthermore, any interest charges will be proportionally rebated should you make early repayments. In a worst-case scenario, Taxi hold your most recent tax deposit a security and may need to liquidate this, which would result in your business having an outstanding liability with IRD.

To explain what happens better, we asked Taxi to outline what they do in default situations:
“When a business faces difficulty repaying the funds accessed through Taxi, our approach is proactive and supportive. We understand that every situation is unique, and here's how we typically handle these cases: 
  1. We encourage businesses to reach out to us at the first sign of financial pressure. By discussing the situation early, we can explore options together to address the repayment issues.
  2. Depending on the circumstances, we may be able to offer solutions such as extending the repayment term. One of the key factors that contribute towards our ability to extend a repayment term is whether a taxpayer has continuously paid their tax through Taxi. Continuing to pay your provisional tax through Taxi gives us ‘fresh’ tax payments that we can re-secure against, freeing up your older tax payment to be transferred to IRD when they’re expecting it.
  3. We provide clear information on how interest and fees accumulate on any outstanding balance and the implications of non-repayment. Our team is committed to helping businesses understand their options.
  4. In cases where repayment becomes infeasible, we work collaboratively with the business to find the best possible outcome.
  5. In instances where a business ceases communication and defaults on their repayment, Taxi may need to assume control over their tax deposit which has been used as security. This action could lead to the business facing unresolved tax obligations with Inland Revenue.
 
Our goal at Taxi is to support businesses through their financial challenges, not just when times are good but especially when they face difficulties. We're here to help navigate through these challenges with practical, tailored solutions that safeguard both the business’s future and our relationship with them.”

While there are no personal guarantees involved, defaulting on what's due to Taxi can result in significant financial consequences, including accumulating interest, potential tax penalties, and difficulty borrowing in the future.
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Who Uses Taxi? What Are Some Examples?

Since launching Taxi in March 2024, Taxi has reported to have seen a huge uptakeacross multiple industries, including:
  • Construction, maintenance and logistics
  • Manufacturing
  • Businesses, HR and consulting services
  • Hospitality, food & beverage
  • Professional services firms
  • Any seasonal business
  • Any business that is growing

Typical examples of businesses using Taxi for funding:

Example 1: Auckland Clothing Boutique
  • Annual Provisional Tax Payments: $30,000
  • Borrowing Limit: $27,000 (90% of provisional tax)
  • Loan Amount: $25,000
  • Use of Funds: The boutique needs extra stock for a major seasonal sale and decides to use Taxi for quick funding access. They borrow $25,000, available the next business day, to secure new inventory.
  • Fees: The 9-month loan period has an upfront interest rate of 7.09% p.a., which works out to around $1,329 in interest costs. Additionally, there's a monthly facility fee of $40.50 based on their borrowing limit, totalling $364.50 over the nine months. This brings the total cost of borrowing to about $1,694.
  • Overall, the boutique appreciates the flexibility of not needing personal guarantees and can focus on boosting sales during its peak season, repaying the Taxi funding as its cash flow allows, and avoiding high-interest loans, lines of credit, and overdrafts. 

Example 2: Christchurch Construction Firm
  • Annual Provisional Tax Payments: $50,000
  • Borrowing Limit: $45,000 (90% of provisional tax)
  • Loan Amount: $40,000
  • Use of Funds: The construction firm is experiencing sluggish client payments, which is causing cash flow challenges. To cover wages and purchase materials for an ongoing project, they borrowed $40,000 through Taxi. The funds were available the next business day, allowing the firm to continue operations smoothly.
  • Fees: The 9-month loan comes with an interest rate of 7.09% p.a., which amounts to approximately $2,126 in interest costs. Additionally, there is a monthly facility fee of $67.50, based on their borrowing limit, totalling $607.50 over the 9-month period. The total cost of borrowing comes to about $2,733.
  • Overall, the construction firm values quick and easy access to funds without needing personal guarantees. This keeps the project moving and avoids high-interest traditional loans or delays due to cash flow issues.

Example 3: Queenstown Restaurant Expansion
  • Annual Provisional Tax Payments: $80,000
  • Borrowing Limit: $72,000 (90% of provisional tax)
  • Loan Amount: $60,000
  • Use of Funds: The established Queenstown restaurant is expanding to a second location in Wanaka and needs funding for renovations, equipment, and hiring staff. They borrow $60,000 through Taxi to accelerate their expansion, with the funds available the next working day.
  • Fees: For the 9-month loan, they pay an interest rate of 7.09% p.a., resulting in approximately $3,191 in interest costs. Based on their $72,000 borrowing limit, the monthly facility fee is $36 per monthl, adding up to $972 over the nine months. The total cost of borrowing is about $4,163.
  • Overall: The restaurant owners appreciate not having to provide personal guarantees or business asset security. This allows them to expand quickly without taking on expensive traditional business loans or overdrafts, and they can repay the funding as revenue from the new location starts to come in.
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Frequently Asked Questions

Disclaimer: The information provided in these FAQs is for general informational purposes only and should not be considered financial, tax, or legal advice. Please consider consulting with a qualified professional for advice tailored to your specific situation.

How does Taxi keep my tax payments secure?

Taxi ensures that your provisional tax payments are held in a secure environment managed by the Government-owned Public Trust in a tax pooling account at Inland Revenue. This system means your tax payments are not only safe, but they also act as collateral for the funds you borrow. It's fully IRD-compliant, meaning there's zero risk of your funds being misused or diverted. Rest assured, your business's most critical payments are protected with the highest level of security.

How much funding can I access through Taxi?

You can borrow up to 90% of your provisional tax payments made through Taxi in the previous 12 months. If you've paid $50,000 in provisional tax, up to $45,000 is instantly available for your business needs. Whether you're dealing with cash flow issues, looking to expand, or navigating an unexpected challenge, Taxi gives you flexible, low-cost access to the funds you've already committed to paying the IRD.

What happens if I can't make a repayment on time?

Taxi encourages open communication if your business hits a rough patch and you can't make a repayment. You'll need to contact their support team who will help you explore alternative options to keep your business on track. The key is flexibility - if you're proactive, Taxi can work with you to adjust the repayment plan, minimising the financial stress on your business.

Can I skip repayments or repay early?

Yes - with Taxi, you can skip repayments during the nine-month term as long as you catch up before the term ends. Plus, if things are going better than expected and you want to repay early, you'll get a rebate on the prepaid interest. There are no penalties or extra costs - just complete flexibility that adapts to your business's cash flow.

Do I need to tell my accountant about using Taxi?

While it's encouraged to involve your accountant, it's entirely your choice. Taxi provides an advisor portal, which offers seamless visibility if you let your accountant oversee your Taxi account. Using Taxi doesn't require heavy paperwork or accountant involvement—it's designed to be simple and fast, so you can focus on running your business without delays.

What types of businesses can benefit from using Taxi?

Taxi is ideal for any SME paying provisional tax and needing fast, flexible funding. Taxi have seen businesses use it for everything from expanding into new locations, purchasing vital machinery, and managing delayed payments to navigating seasonal dips in revenue and reducing other high-cost debt. Whether you're in construction, retail, hospitality, or professional services, Taxi allows you to access funds without the hassle of personal guarantees or complex loan applications.
Are you a business borrower? Do you have experience with business funding, lines of credit and/or loans that you would like to share? Contact our research team today.

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