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James Millar
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wanopt, post: 87866 wrote:
Hi All,

anyone here had the experience of loaning their own money to their own company. Any pitfalls I should look out for? Is a registered accountant required to draw it up or can you do it yourself? Is there a number of ways to do it? Company pays you back with interest; as a dividend via shares; as part of a salary etc? Thanks.

Mark Sargent

Hi Mark.

Yes you can loan funds to your company very easily. There is currently no mandatory requirement to charge interest on a related party credit loan (although depending on the business it may be a good idea to do so). The only issue that can really come from debt based funding (as opposed to equity) is that it can lead to a less credible and less solvent balance sheet. It’s far easier to have negative net assets on your balance sheet if the general business funding is recorded as loan rather than equity. Not a massive problem if you are making and retaining profits and if you document your loan conditions such that you can’t call the funds if the company balance sheet is in poor condition.

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