Borrowing money from your company: smart move or pitfall?
August 2025 - As an SME manager, you may occasionally find yourself in need of some extra financial breathing space. In such cases, it can be tempting to view your own company as a “piggy bank”. While this is possible, it is important to note that acting carelessly could result in unpleasant tax surprises or even fines.
Private expenses? Don't just charge them to the business!
Filling up your car, going on holiday or buying a private car using the company's bank card? Many entrepreneurs do this out of convenience or without thinking twice. But as soon as you pay for private expenses with company money, you automatically build up a debt to your company. That debt must be processed correctly for tax purposes.
Practical tip: use separate bank cards or accounts for private and business purposes. This will prevent private expenses from unknowingly being charged to the company.
How can you legally withdraw money?
In practice, there are two commonly used methods:
a. Current account
Your company keeps a kind of internal account showing how much you still owe, or vice versa. Such a current account is flexible, but...
Pay attention to the interest rate: before 2024, you must pay at least 6.25% interest. If you don't, the tax authorities will consider the difference as extra wages. You will then have to pay taxes and social security contributions on this amount.
Avoid the snowball effect: pay the interest effectively, not just “on paper”. Otherwise, your debt will accumulate year after year, including new interest.
Practical tip: set a half-yearly reminder in your diary to monitor the current account and pay the interest owed on time.
b. Formal loan
An alternative is a loan with fixed terms: duration, interest rate, repayment. In the past, this was more attractive from a tax perspective, but now the interest rate is often higher than for a current account. For 2024, for example, it is 6.80% (except for car loans: 3.40%).
Put everything in writing in a clear contract.
Agree on a feasible repayment plan and stick to it.
Practical tip: use a standard loan agreement (templates can be found online) and have it checked by your accountant or bookkeeper. This way, you can be sure that you are not making any mistakes.
Don't forget the repayment
Whichever method you choose, any debt owed to your company must be repaid. In the event of sale, cessation or death, this can be problematic if the amount is high. So make sure you arrange this properly in advance:
Draw up an annual repayment plan.
Discuss the state of affairs during the general meeting.
See if you can use dividends to repay a debt.
Don't be an ignorant director
Borrowing money from your company is perfectly legal, but only if you respect the rules. Carelessness can cost a lot of money. Always discuss your plans with your accountant or tax advisor.
