Planning to start or expand a business? That's great! Especially when your mother and father are prepared to lend a financial hand when you’re looking to raise capital. But is that allowed? And if it is, is there a correct way to go about it?
Financial support is possible
Financial support is possibleYour parents may give you money to set up or expand your business. In fact, other family members and your friends may also do their bit to help financially.
The way to go about it
The win-win loan
When your parents want to support your business financially, they can provide you with a win-win-loan. This Flemish-government support measure gives business starters the opportunity to borrow a certain amount of money from family, friends or acquaintances.
The win-win loan means there are benefits for the other party, too Your parents qualify for annual tax relief on the amount they lend, which comes to 2.5% of the outstanding principal.
Good to know: suppose you suffer a setback and are unable to repay the outstanding loan amount. What’s happens next? Your parents will receive a one-time tax break equalling 30% of the total amount they have 'lost'.
Basisprincipes van deze lening
- It is a subordinated loan
- It is recorded in a private or notarial deed
- It runs for eight years• Your parents get tax relief of 2.5% per year
- There are three repayment options:
- A lump-sum repayment after eight years
- Repayments every month, quarter, six months or year
- Early repayment of the outstanding balance
When you take out a win-win loan, you also have to pay interest on the agreed dates. The interest is calculated by multiplying the amount of the loan by the interest rate in the deed.
Note: you can’t just set any old interest rate. It may not be higher than the statutory interest rate in force when the loan starts or less than half of 2.5%, the current statutory interest rate (in 2015).
Your parents may only extend the win-win loan provided:
- They live in the Flemish Region
- They lend no more than 50 000 euros each
- The loan is not connected with their own professional activities
- Neither parent is a manager, employee, director or shareholder of your business (if it is a company)
- They have not borrowed money by means of another win-win loan for the term of the win-win loan they’ve provided
You may only take out a win-win loan if:
a) You have an SME that is established in the Flemish Region. This means having:
- No more than 250 people working in your enterprise
- a balance sheet total that doesn’t exceed 43 million euros
- turnover the doesn’t exceed 50 million euro
Important: if you borrow not only from your parents, but also from other family members,friends or acquaintances, the total amount of the loan may not exceed 200 000 euros.