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Ltd Loan to fund new ltd


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Hi, 
been google searching this to death but cant find what I am looking for.

I have been trading through a ltd as a consultant for a few years now, I have built up decent money and plan to start a new ltd for investing in and flipping some properties with a friend who is a builder.

I have a 5 year plan together and run it by my accountant who seems happy with it

At present to make the first purchase I will need about another 50-60% of the property value to make the purchase.
I understand the options out there with bridging which is great, however, is there anything to stop me getting a loan through my first ltd company with a 2 or 3 year repayment plan (total repayments would incur about 6-10K in interest... which in the long run would save me a fortune), then lending this money to my new ltd which I will be purchasing and selling the renovated properties through? I will speak to my accountant about this but wanted to ask on here, maybe someone has tried something similar.

many thanks.

 

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The mortgage company might want to see where the money came from in the first place and then my not lend if it's 100% debt. The actual lending between companies isn't a problem although I think there could be some issues with it which an accountant/tax advisor would have to help you with.

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Thanks for the response. 
i have had the discussion with my Accountant. 
we are going to have a sit down to talk through the tax implications of me loaning my new company money to get started as I’ll be personally lending and lending from my other LTD. I applied for a little help from the gov but didn’t pass the criteria. 
also not able to get a loan for current LTD with the intention to lend it to the new LTD. 
I assumed this would be the case but was worth looking into as could have saved me a great deal of interest over the first few years of trading and having the extra cash increases the bar level for the properties I can look at. 
but will be starting from low purchase costs (if I can get my hands on any) and will have to see how that progresses. 

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  • 1 month later...

@harbs getting a personal loan will not help in your case as loans have clause which does not allow the money for deposit for property but if you are thinking as using all of it to buy cash, I don't know, do check the clause. Either way, the interest rate will be high of you do managed to get more than 50k!

Getting a loan with a newly create company will not be feasible and will be same as getting a loan as yourself/directors  being guarantors taking the loan.

Both taking loans will impact your credit score.

If you later take any other loan, this will impact on your credit score. So be careful before applying for any loans.

This just my point of view and do check with your accountant first.

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7 minutes ago, Alvin said:

@harbs getting a personal loan will not help in your case as loans have clause which does not allow the money for deposit for property but if you are thinking as using all of it to buy cash, I don't know, do check the clause. Either way, the interest rate will be high of you do managed to get more than 50k!

Getting a loan with a newly create company will not be feasible and will be same as getting a loan as yourself/directors  being guarantors taking the loan.

Both taking loans will impact your credit score.

If you later take any other loan, this will impact on your credit score. So be careful before applying for any loans.

This just my point of view and do check with your accountant first.

Sound advice and spot on. 
I’ve opted to build more money up in my IT LTD and lend that across. 
it’s taken 5 weeks so far and I still don’t have a business account for my new LTD so until the bank finally set it up I can’t do much anyway. Not all bad. Means I am building more of a cash pot. 

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Hi,

I've done this. My partner and I are both IT contractors and we created a SPV and passed the money through a loan from our Ltds. We didn't have any problems with the lender (Kensington), we had to show them our Ltds bank statements for them and the solicitors to track the money. Our accountants didn't have any problems with it either. We got someone to write the loan agreement for us, recommended by another person who's done this before. I can give you his details, feel free to PM me if I can help you with any questions.

Sorry I misread your post! And I can't find how to delete my reply...
 

Edited by mara escalante
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  • 2 weeks later...

Hi everyone,

I'm also an IT contractor working through my own limited company. Similar situations described above, my company has built up surplus profits from which I would like to invest in property. I've been advised by my accountant to set-up a new LTD company to do this with. I've been advised that I can then loan money to the new property investment company from my existing limited company.

Does anyone know whether I need to produce a formal loan agreement for this? My accountant has said no , but that doesn't feel right to me. Surely the particulars of the loan would need to be documented, even if I am owner of both companies?

@mara escalante

Mara - would you mind sharing the details of the person who helped set-up the loan agreement?

Thanks,

Jit

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