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• 11 Aug

  How To Repay Directors Loans Made To Your Company

  Repaying director's loans that you have made to your company can be achieved with the use of receivables financing. We recently helped a client accomplish this by arranging a Confidential Invoice Discounting (CID) facility for them. This was an innovative method of repaying their director's loans to the company.

  To find out how much you could raise and to get a quote:

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  Repayment Of Directors Loans To A Company

  

  A common way to finance a business is for the directors to inject their own money. Sometimes this can be in the form of share capital. Once you inject the capital, it becomes the property of the company. The money can only be withdrawn by way of a dividend or other taxable method, e.g., a salary payment. However, there is a more common route is to inject funds on a more temporary basis. This will often be in the form of a "director's loan".

  By raising money a company may be able to arrange repayment of a director's loan by the company.

  How Much Could You Raise From This Innovative Method

  Find out how much you could raise from your unpaid sales using our Cash Calculator.

  Repayment Of A Director's Loan

  Director's loans are monies lent to a company by its directors. They are repayable, however, these arrangements are often informal, with no set repayment dates or schedule. The money can normally be repaid to the directors, without being considered a taxable dividend.

  Getting Your Money Out

  We were recently able to assist a timber company with exactly this issue. The directors had loaned the company substantial amounts of money, by way of loans. The directors wanted their outstanding loan balances repaid. However, they needed to preserve the working capital position of the business, so that its cash flow was not adversely affected by the change.

  We arranged an invoice discounting facility to raise funds for the company so it was able to make repayment of the director's loans to the company using those funds. This repaid the loan made by the directors of the business, releasing their personal money.

  Confidential Invoice Discounting To Repay Director's Loans

  Confidential invoice discounting was arranged to release a substantial amount of capital to our client company. This will take the place of the loans for working capital purposes. The payout from the CID facility will enable the company to repay the money lent by its directors, without affecting its working capital position or impacting its cash flow.

  No Personal Guarantees Required (No PGs)

  The added benefit was that we were able to find them a facility without any personal guarantees required (often called "PGs"). This reduces the personal contingent liabilities of the company's directors.

  This case study demonstrates you can use receivables finance as part of planning how to repay your director's loans and release a substantial amount of money to your company directors.

  By Glenn Blackman