That depends entirely on whether the cash-flow problem is temporary or structural. A VAT loan spreads a quarterly VAT bill over a number of monthly payments so HMRC is paid on time. It can be sensible where the money is genuinely coming and simply has not arrived yet. It is not a solution for a business that cannot cover its VAT at all.
The case for one is usually timing. VAT is collected from customers, held, and paid over at the end of the quarter. If customers pay late, or the quarter included a large purchase, the bill can land before the cash does. Borrowing to pay it on time avoids interest and penalties from HMRC and avoids the compliance record that comes with paying late.
The case against is cost and repetition. A facility has a cost, and if you need one every quarter that is a sign the underlying issue is margin, pricing or credit control rather than timing. Borrowing quarterly to pay a recurring bill just moves the pressure and adds a cost on top of it. It is also worth comparing against an HMRC Time to Pay arrangement, an overdraft, or invoice finance — all of which may be cheaper or better suited depending on your position.
There is a practical point too. VAT you have charged customers was never really your money, and treating it as working capital is what creates the shortfall in the first place. Setting VAT aside as it is collected removes the problem entirely.
We are a credit broker with a panel of over 60 lenders and can look at whether a facility is available and on what terms. We cannot tell you whether taking one is the right answer for your business — that conversation belongs with your accountant, who can see the whole picture.
This is general information, not tax advice. Confirm your own position with your accountant or HMRC.