Buying something on 0% APR for business?

[PerfectStorm]

So what are the benefits to taking on a two year loan at 0% to a cash rich LTD?

The same reason smart contractors delayed their VAT and self assessment payments when the coronavirus schemes started up; cashflow and interest. And good credit scoring, if there is such a thing for businesses.

[Lance]

None... The benefit is solely cash flow. Cash flow is just typically an issue with a new LTD with unfavourable payment terms on client invoices.

but a new LTD like you describe isn't going to get credit. This only helps when the owner also has cash problems, which kind makes a £2k Macbook a bit pointless. Best bet at that point is a £350 laptop from PC World, but credit for that is more like 30% APR.

[Maslins]

So what are the benefits to taking on a two year loan at 0% to a cash rich LTD?

Might be getting 0.5% interest or so on the money in a biz saving account. If it were me I'd just buy outright.

[jayn200]

So what are the benefits to taking on a two year loan at 0% to a cash rich LTD?

None... The benefit is solely cash flow. Cash flow is just typically an issue with a new LTD with unfavourable payment terms on client invoices.

[Paralytic]

So what are the benefits to taking on a two year loan at 0% to a cash rich LTD?

This. Unless you're somehow earning a decent return on the money you'd otherwise pay out up front, I'd just keep it simple and pay for it.

You'd probably be better off paying for it on a personal cashback credit card, and reimbursing yourself via the Ltd.

[northernladuk]

It's straight forward (though not quite as straight forward as paying in full up front!).

If you're a FreeAgent user, I'd suggest setting it up as a "Bill" for the whole cost. Then just allocate each bank transfer towards it as "Bill payment" and allocate towards that bill. If there's no interest this should be fine, no journals/manual adjustments required. The final payment should nicely clear off the bill.

So what are the benefits to taking on a two year loan at 0% to a cash rich LTD?

[ladymuck]

It's straight forward (though not quite as straight forward as paying in full up front!).

If you're a FreeAgent user, I'd suggest setting it up as a "Bill" for the whole cost. Then just allocate each bank transfer towards it as "Bill payment" and allocate towards that bill. If there's no interest this should be fine, no journals/manual adjustments required. The final payment should nicely clear off the bill. If your accountant's feeling geeky then at year end time they may split the amounts due in <1 year and >1 year.

I would do that for something to be paid off relatively quickly, say within six months, but not for a two year term. Just a preference, I guess

[Lance]

cue thread in 2022 about "how do I MVL my company when I have a creditor on the books and the early repayment charge is huge?"

[Maslins]

It's straight forward (though not quite as straight forward as paying in full up front!).

If you're a FreeAgent user, I'd suggest setting it up as a "Bill" for the whole cost. Then just allocate each bank transfer towards it as "Bill payment" and allocate towards that bill. If there's no interest this should be fine, no journals/manual adjustments required. The final payment should nicely clear off the bill. If your accountant's feeling geeky then at year end time they may split the amounts due in <1 year and >1 year.

[ladymuck]

I've bought stuff on 0% with no issue before.

You would debit an asset account and then credit a loan account (may be called a non-current liability) with the cost of the laptop. When you make a payment, you credit the bank and debit the liability account. I would create a new liability account with the name of the lender so it's clear in the accounts but you could also have a generic account called 'Hire purchase' or some such too.

Something I've noticed on these things is that often the loan paperwork and the set up of the DD are separate things. So you may find it easier for it to be a personal loan on paper but the bank account be your LtdCo.

[northernladuk]

Anyone know?

Your accountant.

A free loan is only good if it provides some benefit. What are the benefits to you tying yourself to a loan which has the risk of missed payments and other unforseen problems of just paying for it and getting on with it? (Genuine question as I might be missing something)

[d000hg]

The new Mac I want to buy happens to have a 2-year 0% APR offer available. While I have the cash up-front, a free loan is not to be sniffed at but I have no idea how that would play in terms of company accounts.

Anyone know?