Startup loan vs. personal loan

gyorfitam

Hi Everyone!

I am planning to have a loan to invest in some camera gear (I want to run a video/photography business) and I've found 2 different loans that could work:
- a startup loan
- a regular personal loan
Long story short: the personal loan have a lower interest rate than the startup loan. It seems clear which one to go for, but there is only one issue. In the FAQ, there is a section "What can I use the loan for?" and it says:
"There are a few things you can't use your loan for:

To buy or finance timeshares
To buy a UK or foreign property or pay any associated costs (eg stamp duty)
To finance a limited company
For business purposes
To invest in the stock market
For gambling
For illegal purposes
As a deposit to support a mortgage application with any lender
To repay negative equity or to pay off any part of a mortgage
To refinance a loan arranged through the student loan company"
My question is: what does business purpose means exactly?

boo_star

gyorfitam wrote: »

Hi Everyone!

I am planning to have a loan to invest in some camera gear (I want to run a video/photography business) and I've found 2 different loans that could work:
- a startup loan
- a regular personal loan
Long story short: the personal loan have a lower interest rate than the startup loan. It seems clear which one to go for, but there is only one issue. In the FAQ, there is a section "What can I use the loan for?" and it says:
"There are a few things you can't use your loan for:

To buy or finance timeshares
To buy a UK or foreign property or pay any associated costs (eg stamp duty)
To finance a limited company
For business purposes
To invest in the stock market
For gambling
For illegal purposes
As a deposit to support a mortgage application with any lender
To repay negative equity or to pay off any part of a mortgage
To refinance a loan arranged through the student loan company"
My question is: what does business purpose means exactly?

Exactly what it says on the tin.

You can't use it for business purposes.

And since you want a definition https://lmgtfy.com/?q=business+definition

It's not rocket science.

gyorfitam

And what if I'm not writing it down as a business expense? In my head, that's just a personal expense at this point.

AnotherJoe

If you don't write it down as a business expense then won't the loss you'll make because you are paying extra tax due to not being able to offset it against income, be far larger than the extra in interest of the loan?

gyorfitam

I should know my income to be able to answer this question properly. But we are talking about roughly £5000 loan and according to my calculations, the difference between the loans I'm paying back at the end in total would be around £430. So maybe it would be better what you are saying but the situation is a little bit more complicated. I would like to take this loan with my partner who would like to buy some stuff for her business as well and because we are just going to move soon, we will need a little bit for furnitures as well. So it's more convenient to have one shared loan for everything and also there is a much higher chance we will actually get accepted. The issue is, I don't have any credit history (but she has), just recently started to use credit card to start to build my credit score but this will take some time I guess.

poppasmurf_bewdley

So you could be committing fraud if you take out a personal loan for setting up a business, and starting a tax fiddle by not declaring your purchases for a business.

Not a good way to start a business!

gyorfitam

But in this case I'm doing the same by using my existing equipment I bought from my salary. Or am I missing something obvious here?

boo_star

gyorfitam wrote: »

But in this case I'm doing the same by using my existing equipment I bought from my salary. Or am I missing something obvious here?

In relation to what? The tax implications or the loan?

gyorfitam

I meant I start using some equipment I already own (bought it for cash earlier) for business purposes (as well) but just not mentioning it anywhere. I think I'm just simply stupid by doing this but not committing any crime. I'm just voluntarily paying more tax.

AnotherJoe

I see your point G and it's highly unlikely there would be any legal implications, but could you not split the loan? If you need say £3k for the camera equip, then borrow that. And get the tax relief.
Or do you think you might not get it and you'd be ina worse position applying fo the personal loan later on after being rejected for the business one?

boo_star

AnotherJoe wrote: »

I see your point G and it's highly unlikely there would be any legal implications, but could you not split the loan? If you need say £3k for the camera equip, then borrow that. And get the tax relief.
Or do you think you might not get it and you'd be ina worse position applying fo the personal loan later on after being rejected for the business one?

OP said in their first post that the personal loan has a lower APR.