drawing down cash
Discussion
I have a stable business, by the grace of God. There is a good amount of stock in the business which I want to borrow against. The business has no borrowings at present and is 100% owned by me.
The reason I want to borrow is to inject a load of cash into the business account that I will draw down and use to buy my first home. There is a six figure amount in the directors loan account but not enough cash in the business at present to pay this back to me.
I've never taken any loans before. Is this something that is possible? What sort of interest rate would I be paying? Loan would probably be for 5 years, possibly fewer years. It depends on the business generating that cash back and paying it back.
The reason I want to borrow is to inject a load of cash into the business account that I will draw down and use to buy my first home. There is a six figure amount in the directors loan account but not enough cash in the business at present to pay this back to me.
I've never taken any loans before. Is this something that is possible? What sort of interest rate would I be paying? Loan would probably be for 5 years, possibly fewer years. It depends on the business generating that cash back and paying it back.
Are you saying that it is the limited company that will actually be doing the borrowing as the security seems to be assets owned by the company and not assets owned by you personally.
If that is the case, the borrowed cash would initially go to the company bank account. I presume the amounts required by you personally to buy the property would then be drawn from the company. Of course, once you draw money from your own company, there will be tax (and possibly NI) implications arising once the cash is withdrawn - depending on the nature of the withdrawals i.e. salary, dividend, director's loan etc.
If that is the case, the borrowed cash would initially go to the company bank account. I presume the amounts required by you personally to buy the property would then be drawn from the company. Of course, once you draw money from your own company, there will be tax (and possibly NI) implications arising once the cash is withdrawn - depending on the nature of the withdrawals i.e. salary, dividend, director's loan etc.
Yes, the loan will be taken by the company and drawn down by me. Mainly through the return of directors loans and dividends and possibly PAYE/NI. I pay all tax on time and in full.
I am just a bit clueless on the terms of the loan. If secured against company assets that are fairly liquid, what rates would I be paying? If I had say 500k of fairly liquid assets, what is the max I could borrow? Is there a ratio?
I am just a bit clueless on the terms of the loan. If secured against company assets that are fairly liquid, what rates would I be paying? If I had say 500k of fairly liquid assets, what is the max I could borrow? Is there a ratio?
If it just repays the director's loan only, then there are no issues - although it would just swap the company's liability from money owed to a director to money owed to a bank - which may give rise to non-tax issues regarding treating the director as a preferential creditor.
Obviously, if the amount withdrawn from the company EXCEEDS the balance due to the director, that's when tax issues need to be addressed.
Obviously, if the amount withdrawn from the company EXCEEDS the balance due to the director, that's when tax issues need to be addressed.
Eric Mc said:
If it just repays the director's loan only, then there are no issues - although it would just swap the company's liability from money owed to a director to money owed to a bank - which may give rise to non-tax issues regarding treating the director as a preferential creditor.
A tad pessimistic assuming the Ltd will go bust shortly after effecting the loan, no?
Hmm
As I said, I know nothing about loans
But I thought if would be a combination of your ability to pay back the loan, the security and the ratio of loan to security
But since the security is not property, things could in theory go pop and then there is no security.
I'll speak to my relationship manager at the ban and see what he says.
As I said, I know nothing about loans
But I thought if would be a combination of your ability to pay back the loan, the security and the ratio of loan to security
But since the security is not property, things could in theory go pop and then there is no security.
I'll speak to my relationship manager at the ban and see what he says.
MrJuice said:
Hmm
As I said, I know nothing about loans
But I thought if would be a combination of your ability to pay back the loan, the security and the ratio of loan to security
But since the security is not property, things could in theory go pop and then there is no security.
I'll speak to my relationship manager at the ban and see what he says.
I wouldn't tell the bank the "real" reasons as to why you want the loan As I said, I know nothing about loans
But I thought if would be a combination of your ability to pay back the loan, the security and the ratio of loan to security
But since the security is not property, things could in theory go pop and then there is no security.
I'll speak to my relationship manager at the ban and see what he says.
Best see you friendly bank manager
Rates are really "how long is a piece of string" however couple examples and data points
Secured loan £400k, 5 years, long trading history was 9%
£250k loan (with director PGs) short trading history was 14%
Average funding circle rate (for lowest risk, highest quality) is c9%
As you will see business loans typically much higher than a personal mortgage.
If you have c1/2 million plus in stock, you might be able to raise hundreds of thousands simply by securing longer payments terms with your suppliers ???
Rates are really "how long is a piece of string" however couple examples and data points
Secured loan £400k, 5 years, long trading history was 9%
£250k loan (with director PGs) short trading history was 14%
Average funding circle rate (for lowest risk, highest quality) is c9%
As you will see business loans typically much higher than a personal mortgage.
If you have c1/2 million plus in stock, you might be able to raise hundreds of thousands simply by securing longer payments terms with your suppliers ???
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