Shareholder Loan? Control Your Company’s Future (2026)

As a shareholder, you may have a vested interest in the financial health of your company. Sometimes, offering a loan to the company can be a strategic move to bolster its operations or ensure its survival. But how does one navigate the complexities of this financial arrangement in Australia? With the right knowledge and guidance, you can make an informed decision that benefits both you and your company.

Understanding Shareholder Loans

A shareholder loan is a financial transaction where a shareholder lends money to the company in which they hold shares. This can be a strategic move to provide temporary cash flow relief, finance new projects, or manage cyclical financial pressures. Unlike equity investment, a loan does not dilute the shareholder's ownership in the company, making it an appealing option for those who wish to maintain their current stake.

Rates and Requirements

The current financial landscape in 2026 presents varied interest rates and requirements for shareholder loans. These loans can have interest rates ranging from 6.49% to 12%, depending on the company's risk profile and the terms negotiated between the shareholder and the company. It is crucial for both parties to set clear terms to prevent potential conflicts or misunderstandings.

Interest Rate Range	Loan Term	Repayment Terms
6.49% - 12%	1-5 years	Monthly, Quarterly

Eligibility criteria often include the company's creditworthiness, the shareholder's financial standing, and the company's ability to repay the loan. It's essential to formalise the loan agreement with a legally binding contract that outlines all terms and conditions.

How to Arrange a Shareholder Loan

Arranging a shareholder loan involves several key steps:

• Assess the Need: Clearly identify why the company needs the loan and how it will be used to generate value.
• Consult Professionals: Engage with financial advisors or mortgage brokers, like those at Esteb and Co, who have access to 83+ lenders, to understand the best options available.
• Draft a Loan Agreement: Work with legal professionals to create a comprehensive loan agreement that covers interest rates, repayment terms, and any security arrangements.
• Obtain Approval: Depending on the company’s governance structure, you may need board approval or shareholder consent.
• Document the Transaction: Ensure all transactions are well-documented for transparency and future reference.

Tips and Considerations

When considering a shareholder loan, keep these expert tips in mind:

• Interest Rate: Ensure the interest rate is competitive yet favourable to both parties. A rate too low may attract scrutiny from tax authorities, while a rate too high could burden the company.
• Repayment Schedule: Set a realistic repayment schedule that the company can adhere to without compromising its financial stability.
• Tax Implications: Be aware of the tax implications for both the company and the shareholder. Interest payments could be tax-deductible for the company.
• Risk Assessment: Evaluate the risk of lending to the company, especially if it is currently facing financial difficulties.

Frequently Asked Questions

• Can any shareholder provide a loan to a company? Yes, any shareholder can provide a loan, but it must be documented with a proper agreement.
• Is board approval required for shareholder loans? It depends on the company’s bylaws and governance structure. Often, board approval is advisable to ensure transparency.
• Are shareholder loans tax-deductible for the company? Interest on shareholder loans can generally be tax-deductible, but it’s best to consult a tax advisor.
• What happens if the company cannot repay the loan? The shareholder may negotiate revised terms or consider converting the loan into equity.
• How do shareholder loans affect company valuation? They do not dilute ownership but can affect liquidity and financial health if not managed properly.
• Can a shareholder demand immediate repayment? Typically, terms are outlined in the loan agreement, and deviations require mutual consent.