Legal Question in Business Law in Illinois

Loaning Capital To A Business

I have a company that would like me to loan money to bridge there cash needs when purchasing equipment. The loans are paid back within 1-2 weeks. Are there any legal issues, that I should be aware of. And what are the tax implications?

Thanks,


Asked on 1/22/09, 1:26 pm

2 Answers from Attorneys
Patrick Tracy Patrick J. Tracy, Esq, P.E.,

Re: Loaning Capital To A Business

The biggest issue is an agreement covering the loan. The second thing is to determine their ability to pay by such tools as their Dun and Bradstreet report. The rest is a business decision by you.

Contact an attorney in your jurisdiction to prepare a promissory note.

Good luck!

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Answered on 1/22/09, 1:35 pm
David K. Staub Staub Anderson LLC

Re: Loaning Capital To A Business

Yes, there are legal issues. Are you getting the equipment as collateral for your loan? Are the owners of the business giving you a personal guarantee? What are your rights and remedies if the loans are not repaid within the 1 to 2 week period.

Protect yourself and get appropriate documents which may include an agreement describing the transaction, a promissory note, a security agreement and financing statement, a personal guarantee, and possibly other documents.

As for tax issues, there are ALWAYS tax implications, but if this is true debt and is repaid with interest at a rate that complies with the IRS' imputed interest requirements, the tax treatment should be straight-forward.

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Answered on 1/22/09, 2:01 pm


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