£50K Interest Free Loan for 12 Months

[jamesbrown]

The only reason I can see for a contractor LtdCo using this loan is for personal funding(salary/dividends/directors loan). Our "companies" have hardly any cashflow requirements and anyone being furloughed now has the salary part covered anyway.

Unless I am missing something and contractors are using this loan in the same way SME's are?

Agree, and I think that is the expectation. Nothing wrong with it. Much better to use loan money than tax money.

[jamed]

I guess if you have outstanding invoices. High risk, though. Then again, why would a contractor ltd take this loan unless the contractor were personally struggling and needed the money themselves? Other outgoings should be small and can be mitigated. Eating into tax money is a bad idea.

The only reason I can see for a contractor LtdCo using this loan is for personal funding(salary/dividends/directors loan). Our "companies" have hardly any cashflow requirements and anyone being furloughed now has the salary part covered anyway.

Unless I am missing something and contractors are using this loan in the same way SME's are?

[jamesbrown]

Interested to understand the scenario where you have lots of retained profit but no cash in a one/two person BoS contractor company...

The official FAQ says:



I personally would challenge that a dividend payment was going to provide economic benefit to the business. It's down to how you want to interpret it, I guess.

I guess if you have outstanding invoices. High risk, though. Then again, why would a contractor ltd take this loan unless the contractor were personally struggling and needed the money themselves? Other outgoings should be small and can be mitigated. Eating into tax money is a bad idea.

[northernladuk]

Well neither is dividends part of day to day business? I can only assume if you are able to pay out dividends to fund the Ltd director, then you should be able to pay out a directors loan too. The loan is probably the safer option too as it's easier to transfer back into the business than dividends when it comes time for the business to repay it.

You have absolutely no clue what you are doing do you? That's the daftest thing I've read in a long time. I don't even know where to start with that rubbish.

[jamed]

Where does it say directors loan there? That's not part of day to day business.

Well neither is dividends part of day to day business? I can only assume if you are able to pay out dividends to fund the Ltd director, then you should be able to pay out a directors loan too. The loan is probably the safer option too as it's easier to transfer back into the business than dividends when it comes time for the business to repay it.

[northernladuk]

Interested to understand the scenario where you have lots of retained profit but no cash in a one/two person BoS contractor company...

You need to go out more.... oh.. hang on...

[ladymuck]

So it appears the loan can be paid out as a dividend or director's loan to support our income, which is essentially all LtdCo companies really do at the end of the day anyway.

"Q. Can the loan be paid as a dividend if the business has retained profits but is cash poor? A. "Yes.""

New Bounce Back Loans - help for small businesses and income support for those missing out elsewhere, eg, ltd co directors and self-employed

Interested to understand the scenario where you have lots of retained profit but no cash in a one/two person BoS contractor company...

The official FAQ says:

What can I use the loan for?

The business must confirm to the lender that the loan will only be used to provide an economic benefit to the business, for example providing working capital, and not for personal purposes.

I personally would challenge that a dividend payment was going to provide economic benefit to the business. It's down to how you want to interpret it, I guess.

[northernladuk]

Where does it say directors loan there? That's not part of day to day business.

[jamed]

So it appears the loan can be paid out as a dividend or director's loan(assumed) to support our income, which is essentially all LtdCo companies really do at the end of the day anyway.

"Q. Can the loan be paid as a dividend if the business has retained profits but is cash poor? A. "Yes.""

New Bounce Back Loans - help for small businesses and income support for those missing out elsewhere, eg, ltd co directors and self-employed

[andydd68]

That does make sense. I do have the funds, and some more, to pay the tax charge but was wanting to delay paying it as the future is quite uncertain and I'd rather have the cash for more important personal expenses(council tax/apartment services charges/mortgages/utilities etc) if this bad job market continues for a few more months.

My thoughts too...none of us know how bad the future is going to be post Covid.