[Opinion] Business Loan Account

[AmithS]

Whats you view on business loan accounts... i.e. The money you loan/use to fund your business which ends up as a loan account in your businesses financial statement...

Should you draw the money from the business once your business has enough funds or leave the loan account in place...

Some say its good to have a loan account with your business? What would be the rationale behind this...

[EAB]

Hi AmithS,

There is no fixed rule here. If there is a loan and the individual doesn't earn a lot on interest you can charge interest on the loan and have it as an expense in the company. It will then be taxable in the hands of the individual, but a portion of it is exempt from tax.

So it is a way of getting some profits out of the company without paying taxes.

Note that the interest rate has to be reasonable.

[AmithS]

Thanks EAB

[Andromeda]

Beware of the provisions of the NCA if the company is not registered as a credit provider.

If the loan goes the other way, SARS will, I can 100% assure you, be on your case if interest is not charged, NCA or not.

[Davidjames3321]

Thanks for the information.