How to document a loan in favor of a company

On many occasions, when a loan is needed to avoid going to banks, entrepreneurs cover their company’s cash gaps with their money. Today’s post tells how you should document these loans simply and educationally.

There is nothing wrong with lending money to your company; it is an excellent solution to get out of a lousy liquidity situation. It is often better to face problems with a quick decision than to wait and see what happens. That is why you must know other imaginative ways to clean up a wrong liquidity moment for your company.

Loan to the company

When a company has specific economic problems, it must solve them to continue operating. Many companies choose todo a capital increase because they are unaware of other interesting options.

The best advice we can give for this type of situation is to give your company a policy. You must document the loans using a single, simple contract to do this.

By doing it this way, you can have the money whenever you need it without making a loan contract each time. It is an advantage that you can surely take advantage of when it suits you best.

Loan interest

When loans are made between partners and the company, the agreed-upon conditions must be carefully considered. Remember that the Treasury exercises serious control over this type of contract to avoid fraud.

The conditions must be similar to those in the market if you go to a bank. This guarantees the Treasury that you are doing things well but leaves the partners at ease. Don’t try to do weird things. Always comply with the law to avoid unwanted problems with the law. If you are careful, I’m sure everything will work perfectly.

Loan payments

This is another critical point to consider when establishing the payment conditions for a loan. It is vital to include a clause in the loan indicating that the first payments will be dedicated to paying interest, and once these are covered, the principal will be paid.

It is not necessary to sign this type of contract before a notary, nor is it mandatory to pay any kind of tax to carry it out. Of course, you must present it to your autonomous community’s ITP Liquidation Office as exempt so that the date and agreed conditions are recorded.

Suppose you sign the contract as an administrator of the company. In that case, you must request authorization so that the partners’ approval is recorded and that the agreed conditions do not harm the company.

What happens if the loan cannot be repaid?

If the company is not able to repay the loan, the best thing you can do is convert the debt in its favour into capital. In this way, you will improve the image of your business and facilitate access to possible bank credit.

To finish, and as a summary, you must sign a contract offering the company a maximum amount of money so that it can use it as needed. Above all, it applies the market’s interests to avoid problems with the Treasury and potential partners.

Has it become more apparent to you how to give a loan to your company? Have we left out anything important that you want to point out?

We invite you to contact us if you need help, or if you prefer, you can leave a comment with your possible questions.