Can my business loan money to another business?

If you are contemplating loaning money from one business to another, family members, or a friend, there are some basic things to consider: How will you be paid back? When? What happens if they do not pay you back? And it should all be in writing! When in doubt, consult with an attorney to make sure the proper precautions are in place before agreeing to the loan. Check out this video to learn more.

Often as business owners, we get hit up to lend money either to help another business or help an individual, but you need to protect yourself and make sure that you can get repaid.

Securing Repayment: Importance of Written Agreements

The first piece of advice we give to everyone who's looking at loaning money from one business to another or an individual is to get it in writing on how much you're lending and how you'll get paid back.

Attaching Collateral: Mitigating Risks

Some of the other things to consider are how to attach collateral to the loan; such as putting a mortgage on real estate or having a security agreement for assets of value. These assets could include the title of a motor vehicle, a deed to a property, or any other liquid assets. This way, in the occurrence of a business or individual’s inability to repay the debt, you have something to go after to recover the value of your loan and don’t have to write it off as a total loss.

Expert Legal Guidance: Consulting an Attorney

Prioritize legal consultation before finalizing any loan agreement. An attorney can offer invaluable insights and ensure that all necessary precautions are in place. Seek professional guidance to navigate complex legalities and protect your interests effectively. If you have questions regarding loaning money from one business to another, family members, or a friend, or require assistance in drafting a legally binding contract, please contact us to schedule a consultation today.