Business Loan Rates

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DoctorStrange
DoctorStrange Posts: 384 Forumite
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in Loans
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?

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  • somethingcorporate
    somethingcorporate Posts: 9,449 Forumite
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    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?
    Thinking critically since 1996....
  • DoctorStrange
    DoctorStrange Posts: 384 Forumite
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    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
    somethingcorporate Posts: 9,449 Forumite
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    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).
    Thinking critically since 1996....
  • DoctorStrange
    DoctorStrange Posts: 384 Forumite
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    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
    somethingcorporate Posts: 9,449 Forumite
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    Do you have an accountant yet? I suggest this would be a question to ask them if you are struggling for comparators.
    Thinking critically since 1996....
  • DoctorStrange
    DoctorStrange Posts: 384 Forumite
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    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
    somethingcorporate Posts: 9,449 Forumite
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    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)..
    Thinking critically since 1996....
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