Can Your Company Use the ERTC To Pay Off Corporate Debt?

January 9, 2024
Dayes Law Firm

If your business qualifies for the employee retention tax credit (ERTC), take the time to strategically plan how you will use the extra cash flow that comes with it. Your business may qualify for tax credits worth up to $5,000 per employee per quarter for 2020 and up to $7,000 per employee per quarter for 2021. 

The good news is that your company can use this money for any expense you see fit. But if you’re facing a significant amount of corporate debt, it may be wise to use your tax credits to pay it down. 

Explore the opportunity ERTC provides to help pay off corporate debt and set your business up for a stronger financial future. 

Can You Use the ERTC to Pay Off Debt?

Yes, debt payment is one of the many employment tax credit uses that may make sense for your business. Once the IRS issues you this credit, you can use it for any purpose. A few other practical ERTC applications to consider include:

  • Giving bonuses to employees
  • Fleshing out your employee benefit program
  • Investing in new equipment 
  • Building your cash reserves
  • Launching a new product

Whether the IRS is giving you back $100 or $10,000, you can use this money strategically to help your business.

Should You Pay Off Debt With the ERTC? 

If you’re paying interest on corporate debt, you’re essentially throwing money away every month that your debt remains. Utilizing ERTC money to pay down your debt could be wise, but you’ll want to consider all your options before doing so. 

It’s generally smart to pay off high-interest debt first. But depending on your company’s overarching financial situation, it may make sense to keep some of your debt and consider other ERTC uses for a portion of the credit.

For example, if you have low-interest debt or debt that is interest-free for some time, you may want to use ERTC credits for an investment that will grow faster than the interest rate on the debt. Perhaps you’d rather invest in new equipment that could streamline your operations and boost your profitability. 

Using strategic ERTC deployment can help you maximize your benefits from this credit.

Other Ways to Pay Off Corporate Debt 

If you’re facing a mountain of corporate debt, even the savviest applications of the ERTC likely won’t cover all of your loans. It may be time to consider professional corporate debt management. 

With debt management, you can consolidate your debt into a lower-interest loan and create a plan to pay off your debt quickly and efficiently. With the help of a qualified tax attorney, you can also utilize all tax credits to your fullest advantage to relieve the burden of the debt.

Your business may be ready for debt management if:

  • You have multiple high-interest debts
  • Your business has steady enough revenue to make debt payments
  • You’re not planning to take out any additional loans in the next few months
  • You have taken measures to ensure smart spending moving forward
  • You’re nearing your credit limit for business accounts

Talk to a tax attorney about how ERTC implementation and other tax credits can help you with corporate debt management. 

Dayes Law Firm: Your ERTC Tax Professionals

At Dayes Law Firm, we’re committed to helping businesses like yours accurately claim the ERTC and explore all the ERTC uses that could benefit their companies. We can help you apply for the ERTC and maximize your credits, then evaluate your business’s eligibility for other tax credits that could help you pay down debt. 

Contact Dayes Law Firm today at 800.503.2000 to request your free consultation.