Director’s Loan Finance

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Director’s Loan Finance

Table of Contents

A director’s loan is a great way to access money in your business separate from taking a salary, dividends or expenses. However, you will need to pay back the director’s loan - this is where the director’s loan finance comes into play. 

Taking a director’s loan is useful if you need funds with short notice and the money is in your business bank account. For many business owners, a director’s loan is a way of accessing cash on a one-off basis for personal use, such as to pay off a big bill or support the costs of a special event. 

With a director’s loan comes tax implications, so it’s in your business’s best interest to pay the loan back as quickly as possible. If you don’t have the money to repay straight away, then director’s loan finance might be a viable option for you to settle the score, reduce the fees and spread the repayment cost over a longer period of time. 

So, if you have a director’s loan or you are thinking about taking one out and want to know your repayment options, then let Rangewell’s team of expert financial advisors help. Get in touch with Rangewell today or keep reading to learn more about director’s loans and how our funding solutions can allow for speedy repayment. 

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What is a Director’s Loan?

A director’s loan is when you take money from your business that does not fall into one of the three following categories: salary, dividends or expenses. This is often a one-off sum of money used to support a personal cost, such as paying a bill or for a holiday. This might seem like a great way to access the money tied up in your business bank account, however there are significant considerations you need to bear in mind when taking out a director’s loan. 

You must keep a clear record of all director’s loans in your Director’s Loan Account (DLA). You have to consider the tax implications of this loan, as well as how it will impact other business directors and the company balance. Can your company afford to provide the funds? This is one of the biggest questions you need to ask yourself before taking the money. For this reason, among many others, it’s important to have a repayment plan in place, so you don’t end up in debt to your own business - this is where we can help.

You might also find yourself taking out a director’s loan “by accident” - this occurs when you take out an illegal dividend. You can only take out a dividend from the business’s profit, so if you haven’t made enough profit to cover the dividend, then it may become a director’s loan.  

Short Term Business Finance

A director’s loan is a common way to tap into funds quickly, but it’s important to have a plan to repay this loan. Depending on the amount and your business circumstances, you may simply require short term business loans to repay the director’s loan and avoid the tax implications while waiting for the clearance of a big invoice, for example.

A short term loan can cover a significant amount, usually between £5,000 and £25,000, making it a great way to repay your director’s loan if you know you will have the funds to meet an agreement within 12 months. 

Arranging a short term loan is simple when you work with Rangewell. Our team of expert financial advisors will support you in finding the best funding for your director’s loan repayment, and help you to decide whether that’s a short term business loan or another kind of business finance. Since short term loans are typically repaid within months rather than years, it’s vital that you have a structure in place to cover repayments. This is particularly useful if you have cashflow issues caused by late invoices or a significant expense alongside your director’s loan. 

Speak to Rangewell today to find out whether a short term loan is right for you.

Unsecured Business Loans

Often when it comes to taking out a business loan, you will need to secure this against a tangible asset such as property or inventory. In the case of repaying a director’s loan, you may opt for an unsecured loan, which does not require the same security and is, therefore, useful if you don’t have tangible assets or you would prefer not to use them as collateral.

Unsecured loans can range from £2,000 to £250,000, depending on your eligibility and required terms. Typically, an unsecured loan is repaid in monthly instalments on a short-to-medium-term agreement. When you work with Rangewell, you can often access the funds from an unsecured loan within days of application, making it a great quick way to repay a director’s loan and avoid any tax hits while spreading the repayment cost across a longer period of time. 

Since the loan is not secured against tangible assets, the lenders will likely require a personal guarantee from you and your co-directors, making you as an individual liable for repayment should the company be unable to meet the repayment obligations. The lender will require access to company information as well as background on you and your co-directors, such as other business interests, trading history and personal credit scores, to ensure that repayments could be met should this unlikely scenario occur.

So, if you don’t own any property or assets, or you’d rather not use personal assets as loan security, then speak to Rangewell’s advisors about whether an unsecured loan is a right choice for you and your business. 

Secured Business Loans

As the name suggests, a secured business loan requires security to ensure loan repayment. This is typically a property, but can also be assets in your inventory or even company equipment. If you are unable to repay the loan, then the lenders use these assets as collateral. 

A secured loan is usually for a large amount - more than £50,000 and it can be spread across a long term repayment plan, which is ideal if you have taken out a significant director’s loan and want to pay it back over a long period. 

If you have taken out a large director’s loan, then a secured loan might be the right solution for you as it shifts the liability to a fixed asset and allows you to spread the cost of repayment. To learn more about secured loans, speak to Rangewell today.

Small Business Loans for Bad Credit

One of the reasons you may have taken out a director’s loan is because of bad personal credit. If you have been unable to access another kind of personal loan, then tapping into your business’s cash is a common way to access money without the need for personal guarantees or credit checks. 

However, as we’ve already discussed, repaying this loan quickly and in full is vital for the liquidity of your business. So, if a poor personal credit rating is your problem, then you may want to speak to us about small business loans for bad credit.

Lenders rely on risk assessment to determine whether they can lend you money, so if you or your co-directors have a poor credit history or a less-than-ideal credit rating, then this will impact the funding you can access. Thankfully, there are still lenders that will work with you, even if you have bad credit. 

Applying for finance when you have poor credit requires expert guidance. That’s where we step in. At Rangewell, we support you with the application process and help you to determine the best financing options for you - including scouring the whole of market to find the right lenders for your circumstances. 

If poor credit is your problem and you have a director’s loan to repay, then don’t hesitate to speak to Rangewell today and we’ll support you to get the funding you need. 

Get Director’s Loan Finance with Rangewell

So, whether you already have a director’s loan or you are considering taking a loan from your business to pay for a one-off cost, then make sure you have a repayment plan in place. With Rangewell, we can help you source finance that will repay the loan and spread the cost across affordable monthly payments. 

Need to repay a director’s loan? Get in touch with Rangewell today. 

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