From: Ronald Raygun 
Subject: Re: Personal Bank Loan to fund business
Newsgroups: uk.finance
Date: Wed, 02 Nov 2005 12:28:25 GMT

-=D@n=- wrote:

> Say I borrowed £X as a personal loan from my bank, the purpose being to
> fund me starting up a business of my own. The money would mainly be used
> to pay me, as the only director/employee, a salary for two months, whilst
> I could get the company established and drum up business.
> 
> So, does the company then owe me the £X? Because I've borrowed it
> personally to fund a company?

Yes, of course.  The bank lends it to you, you lend it to your company,
so it owes it to you and you in turn owe it to the bank.  This applies
even if your company has paid you a salary from it.  Think about whether
you really want to do this.  Why not just borrow the money and use it
as you would have used your salary?  If you pass it through the company,
you'd have to pay income tax on it, and you and the company would have
to pay NI on it as well.

This assumes you really are talking about a real (i.e. limited) company.
If you're just starting up a sole trader type of business, it doesn't
make sense to be talking about it owing you anything, since you and it
are one and the same legal entity.  Likewise it doesn't make sense to
talk about salary.  In a ST business you take drawings instead (and I
don't mean charcoal).

> Would it make more sense for me to get a business loan?

Probably not.  Banks would not be too keen to lend to a startup with
no proven track record.  The interest rate might be highere even if
they did.  On the other hand, they will want to check out your own
prospects before they give you a personal loan.  Are you employed at
the moment and intending to resign in order to devote yourself to
your new business?  Make sure you get the loan organised before you
resign!!