How do loans work and what can they be used for?

[CatchWeight]

My LTD company has about £50,000 of turnover a year, with about £36,000 post tax and expenses profits. It’s been going for about 3 years now.

Do you think it’s possible to get a business loan and if so, what can it be used for? £30,000 would be helpful.

Does it have to be with the bank that the business account is held with (Natwest)?

Can the loan be taken by the business and then lent to the directors? Or does it have to be spent by the business directly?

Thanks

 

[Lisa Thomas]

What does the Company need the loan for (or is it really the Directors that need the money personally?)

Is the Company solvent? If not you should take advice from an Insolvency Practitioner before taking out any loan.

What it can be used for will depend on the terms of the loan.

Most Banks will want security for that sum so will want fixed and floating charges over the Company's assets and will also probably want it backed by a personal guarantee from the Directors.

You can approach any lender, it does not have to be the existing Bankers.

 

[CatchWeight]

Thanks.

Yes, the company is solvent. It is really just me and my partner/director who freelance through the company. There are no assets or debts.

The directors need the money really. Does that make it a no-no?

Thanks.

 

[STDFR33]

Thanks.

Yes, the company is solvent. It is really just me and my partner/director who freelance through the company. There are no assets or debts.

The directors need the money really. Does that make it a no-no?

Thanks.

You do realise there will be tax consequences if the company borrows money, and subsequently lends it to a participator?

 

[CatchWeight]

No, didn't realise that. How would that work? Thanks

 

[STDFR33]

https://www.gov.uk/directors-loans/you-owe-your-company-money

 

[CatchWeight]

Thanks. Sounds like a bad idea then!

 

[Mark T Jones]

Why not just take personal loans, which are usually cheAper?

 

[STDFR33]

Thanks. Sounds like a bad idea then!

Yes, wouldn't be great.

If the loan is to be used for personal reasons, rather than business transactions, you would be better getting a personal loan.

 

[PaulThompson]

My LTD company has about £50,000 of turnover a year, with about £36,000 post tax and expenses profits. It’s been going for about 3 years now.

Do you think it’s possible to get a business loan and if so, what can it be used for? £30,000 would be helpful.

Does it have to be with the bank that the business account is held with (Natwest)?

Can the loan be taken by the business and then lent to the directors? Or does it have to be spent by the business directly?

Thanks

Notwithstanding the useful comments around tax from STDFR - there are lenders who will lend for "virtually any purpose" - It needs to be legal!
You are most likely to be limited by affordability - most providers like Funding Circle have a minimum turnover limit.
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Hope that helps?
Paul

 

[CatchWeight]

Hope that helps?
Paul

Thanks, will have a think about it.

 

[CatchWeight]

Why not just take personal loans, which are usually cheAper?

Yes, I think that is probably best.

Not sure if I'd get one for that amount though. Do they do personal loan brokers who can put you in touch with a lender that can help, rather than having to do countless applications and adding more failed attempts to a credit file?

 

[PaulThompson]

Yes, I think that is probably best.

Not sure if I'd get one for that amount though. Do they do personal loan brokers who can put you in touch with a lender that can help, rather than having to do countless applications and adding more failed attempts to a credit file?

Do you have security? (House)

 

[CatchWeight]

No, nothing, I'm afraid.

 

[STDFR33]

You might get some further help if you give some indication of your total annual income and the purpose of the loan.

 

[Gordon - Commercial Finance]

Do they do personal loan brokers who can put you in touch with a lender that can help, rather than having to do countless applications and adding more failed attempts to a credit file?

Yes they do - a good friend of mine has a team of brokers who do this. However even though the loan is unsecured they will only really consider homeowners.

 

[Gordon - Commercial Finance]

Yes, I think that is probably best.

Not sure if I'd get one for that amount though

I think you would be surprised at how easily banks give out personal loans for £30,000. Its an incredibly lucrative product for them. They collect an absolute packet of interest from you.

That being said, I get the feeling you may have a poor credit rating already? Do you have anything specific that makes you think you would get refused?