Business Loan Rates

DoctorStrange

Hi.


I'm about to start my own business, which I'll likely fund myself with a loan of £10k which will be used for working capital / cashflow.


Repayment terms will be over 12 months and I'm wondering what rate of interest to charge my company? I had a quick look around but it seems most sites want you to apply before providing indicative rates.


Barclays seem to offer up to £25k at 10% but is that too much to charge? I don't want the taxman thinking I'm using artificially high rates or anything, but 10% would be a lovely return for me personally!


What would you guys charge?

somethingcorporate

Is it a directors loan into a limited company? Are you sure in the first year of trading you are going to be able to extract such large sums to pay it back?

DoctorStrange

Yes, it'll be a director's loan and I'm confident I'll be able to afford the repayments in year 1 as I've already verbally secured a good sized piece of business (although obviously I'm willing to delay repayments or even write it off if things go badly!)

somethingcorporate

As long as it's a comparable commercial rate you are ok (you should get your accountant to confirm this and make sure you are treating it correctly from a tax perspective).

DoctorStrange

What would a comparable rate be though?


I can't seem to find much info on commercial rates without putting in a proper application.


Is 10% too generous?

somethingcorporate

Do you have an accountant yet? I suggest this would be a question to ask them if you are struggling for comparators.

DoctorStrange

He just says it must be at commercial rates and that I can't charge anything ridiculous like 100%.

Thing is, I've seen some sites at over 50%!

I want to charge 10% but not sure if that's too much.

somethingcorporate

I assume he will be well aware of what commercial rates are given what you are asking is fairly common practice. I am surprised they are not willing to commit to/confirm a number.


If you can find a business loan from a big bank (like barclays) for 10% then this would seem reasonable to me (but I am not a qualified professional, this is not advice etc etc)..