Quick answer
When a director puts personal money into their company, it's usually recorded as a loan from the director — a debt the company owes you, sitting in a director's loan account. Lenders read that balance when they assess the company. Documenting it properly, and agreeing that it won't be repaid ahead of the business lender, keeps things clean. Your accountant should set it up.
Key points
- Money you put into your company is usually a loan to the company, not a gift.
- A director's loan account records what the company owes you — keep it up to date.
- Lenders may ask that your loan isn't repaid before theirs.
- If you borrowed personally to fund the company, keep a clear paper trail.
- Recorded as
- Director's loan account
- Direction
- Director to company
- Opposite direction
- Company to director — Division 7A
- Set up by
- Your accountant
Most small company owners have done it at some point. You started the company with your own savings. You covered wages from your personal account one month when a big client paid late. Maybe you drew on your home loan to buy the company’s first vehicle. The company is yours, so putting money in feels natural — but in law, you and the company are separate, so that money has to be recorded as something.
What is a director’s loan account?
When you put personal money into your company and it isn’t wages, fees or share capital, it’s usually treated as a loan from you to the company. Your accountant records it in a director’s loan account — effectively a running tally of what the company owes you.
It’s normal and legitimate. What matters is that it’s written down and kept up to date, because:
- the company’s financial statements will show it as a liability
- a lender assessing the company will see it and ask about it
- your accountant needs it to be accurate at tax time
- if money later flows the other way, the records protect you from Division 7A issues
How do lenders view money you’ve lent the company?
Generally, positively — it shows you’ve backed the business with your own funds. But it’s still a debt the company owes, so lenders want to understand it.
| What the lender asks | Why |
|---|---|
| How much does the company owe you? | It’s a liability on the balance sheet |
| Where did the money come from? | Savings, or personal borrowing that also needs repaying? |
| Is there a repayment schedule? | Regular repayments to you compete with the lender’s repayments |
| Will you agree not to be repaid first? | Some lenders ask that director loans rank behind theirs |
That last point is common. A lender may ask you to agree that your director loan won’t be repaid while their loan is outstanding, or only in limited amounts. It protects the lender, and it’s usually fine for owners who weren’t planning to pull the money straight back out.
What if you borrowed personally to fund the company?
This is the classic personal-versus-business tangle. The chain looks like this:
- You borrow personally — a home loan redraw, a personal loan or a card.
- You lend that money to the company.
- The company owes you; you owe the bank.
It can work, and your accountant can advise on how it’s treated. But there are downsides: the personal loan sits on your credit file, the security may be your home, and the company’s lender may count your personal debt when assessing you as guarantor.
Often the cleaner option is for the company to borrow directly for the business purpose, with your personal guarantee and, if needed, your property as security. The borrow personally or through the business tool compares both routes. If you’d like to see what a company-level loan could look like, tell us about the company and a specialist will talk it through.
How should a director loan be documented?
Your accountant will set this up, but good practice generally includes:
- a written record of each amount you put in, with dates
- a note of the source (savings, personal loan, home equity)
- any agreed terms — repayment, interest if any, security
- regular reconciliation in the company’s books
If you’re unsure whether past contributions were recorded properly, raise it with your accountant before you apply for finance. It’s much easier to fix before a lender asks.
What about money going the other way?
When a company pays money to its director that isn’t wages, fees or a declared dividend, the ATO’s Division 7A rules can apply. The ATO says such a payment “can be treated as a dividend for income tax purposes” unless it’s repaid or put on a complying loan agreement by the company’s lodgment day. If your director’s loan account has swung the other way — the company is owed money by you — read borrowing from your company.
Illustrative example: A solo director of a landscaping company lent the business $40,000 from her savings to buy its first excavator, recorded in her director’s loan account. Two years later the company applies for a $120,000 loan for a second machine. The lender asks her to agree that her $40,000 won’t be repaid while its loan is running. She agrees, and the director loan is treated as support for the business rather than a competing debt.
Is it better to lend to the company or have the company borrow?
There’s no single answer; it depends on your structure, your tax position and what the money is for. Your accountant can tell you which suits you, and our guide on questions for your accountant before borrowing helps frame the conversation. From a lending point of view, a business-purpose loan in the company’s name usually keeps the paper trail clearest.
Talk through the options with one person
Whether you want the company to borrow or you’re working out how to repay your own contributions over time, a quick conversation helps. The enquiry takes about 60 seconds with no credit check. It stays with one specialist rather than being sent to a queue of lenders, and they’ll call you to understand how the company is funded today. Please answer accurately — including any director loans — so we can match the right option first time.
Frequently asked questions
Is putting money into my company a loan or a capital contribution?
It can be either, depending on how it's set up. Most small company owners treat it as a loan the company owes them. Your accountant should decide and record it properly.
Does money I lent the company count against the company when it borrows?
It's a liability of the company, so lenders will see it. Many lenders are comfortable with director loans, especially if you agree not to be repaid ahead of them.
What if I borrowed against my house to lend to the company?
Then you have a personal loan secured by your home, and the company owes you money. It can work, but it needs careful records. Often it's cleaner for the company to borrow directly with your guarantee — compare both with your accountant.
Can the company pay me back whenever it likes?
Generally it can repay a genuine loan, but if a business lender is involved there may be conditions about repaying director loans. Check your loan documents.
Is this the same as Division 7A?
No. Division 7A is about money moving from a private company to shareholders or their associates. Money going from you into the company is the other direction.