SB: personal director loan to a Ltd company

Legacy_user

Lucky me?

My bank has just agreed to lend my new company dosh under the small firms loan guarantee. Snag is interest is 3.5% over base, there's a 1% arrangement fee and a 2% DTI/government premium on outstanding balance.

This seems quite expensive money, so I'm thinking..and this is where i'd appreciate your help:

Why don't i get a personal (unsecured) loan, at a significantly cheaper rate, and charge my new company interest as a directors loan?
(I'm 90% shareholder in the newco)

neil

zcaprd7

It is legit (I think) - speak to your accountant about it.

heleen

You can do that, but you need to remember that any interest you get from your company will be taxable so it may not work out much better as itnerest paid by your company for the SFL is (I think) tax deductible).

Also, you're gambling with your personal credit status. What if the company can't repay your loan? You're still stuck with the debt. Whereas with a SFL it's the bank's risk (in fact, the DTI takes 75% of the risk, hence the arrangement fee).

If you're 100% sure the company can pay back the loan, then yes, might be worth a shot.