My client is a small brick cutting company, who are proposing to provide a loan to an external party. The company has a turnover of around £120k per year and has a consistent bank balance in the region of around £300k. The loan/mortgage proposal is also in the region of £300k to be repaid over the long term at a fixed rate of interest of 4.79% for the first 5 years?
Firstly, other than the obvious of being able to pay creditors and suppliers when they are due, what are the procedures and tax implications to the company if this goes ahead?
Many Thanks, Jacqui
Replies (8)
Please login or register to join the discussion.
Consumer credit licence
Is it a limited company?
Otherwise I think you need a consumer credit licence.
Various
On the basis that the borrower is a limited company which I think has been established above, is the borrower unconnected (i.e. any family relationships)?
Are there any external shareholders whose interests could potentially be harmed?
Is there security? At an interest rate of 4.79% I would assume that to be the case. How will the loan be secured?
I guess you're also running the risk of turning the company into more of an investment company than a trading company which could have ramifications for ER, BPR etc.
Have to say that from a distance this looks an odd thing to be doing.
Limited company?
I meant if the borrower was a limited company!
Set up another limited company? Loan the company the money? Take the interest as salary? What are you talking about? Why do that?
I'm not very knowledgeable at all
Read this
http://www.oft.gov.uk/OFTwork/credit-licensing/do-I-need/
"The Director has sufficient cash funds to lend the money and could maybe set up another ltd company, loan the company the money and take the interest as salary?"
I don't understand any of the above. I thought you said the company was lending the money but now you say that the director has the funds to lend the money.
Why would anybody lend somebody money but take a salary instead of interest?
I think you need to take legal advice.