# What is a director's loan — and when does business finance replace it?

A plain-English guide to director's loan accounts (DLAs): what they are, how HMRC taxes an overdrawn DLA, the 9-month Section 455 repayment clock, and the practical point at which external business finance from Credicorp is the cleaner, lower-risk alternative.

From Creditcorp — the brand front door for the Credicorp group. Educational only; not tax advice. To apply, head to credicorp.co.uk.

## What is a director's loan account?

A director's loan account (DLA) is a running record in the company's books of money that has passed between the director and the company outside of salary and dividends.

- **In credit** — the company owes the director (the director has lent more than they have taken).
- **Overdrawn** — the director owes the company (the director has drawn out more than they have put in).

An overdrawn DLA is, in effect, an interest-free loan from the company to the director personally.

## The 9-month rule and Section 455

If a director's loan account is still overdrawn nine months after the company's accounting year end, the company must pay HMRC a Section 455 Corporation Tax charge — currently **33.75% of the outstanding overdrawn balance**.

This charge is repayable once the director clears the loan, but the refund follows HMRC's timetable (typically another nine-month wait). In the meantime the company has handed over roughly a third of the overdrawn amount.

A benefit-in-kind charge may also apply if the overdrawn balance exceeds £10,000 and the loan is interest-free or below the HMRC official rate.

## When business finance is a cleaner choice

A Credicorp company loan does something a DLA cannot: it brings new cash into the business from outside, and the company — not the director personally — is the borrower and the sole obligor. No personal guarantee, no charge over a home, no personal credit check.

Business finance tends to be the cleaner answer when:

- The DLA is already overdrawn or approaching the nine-month threshold.
- The working-capital need is short-term and time-boxed — a confirmed order, a supplier deposit, a stock purchase with a known repayment date.
- The tax cost of the DLA (S455 + benefit-in-kind) would exceed the cost of a short-term company loan.
- Clean bookkeeping matters — a company loan is a transparent arm's-length transaction on the balance sheet.

## The Credicorp products

All three products lend to the company. Never to the director.

- **Business Bridging Loan** — £50–£500, 14–84 days, 0.25%/day on principal, £5 establishment fee, 100% cost cap.
- **Credicorp Flex** — revolving facility, draw and redraw, interest on drawn balance only, 14-day rolling cycle.
- **Credicorp Slice** — spread a single supplier invoice across 3 or 4 fortnightly instalments, flat 6% fee.

## Links

- [How business bridging loans work](/learn/how-business-bridging-loans-work/)
- [What a revolving credit facility is](/learn/what-a-revolving-credit-facility-is/)
- [Compare the three products](/compare/the-three-products/)
- [No personal guarantee — what it means](/learn/no-personal-guarantee-what-it-means/)
- [Apply at credicorp.co.uk](https://credicorp.co.uk/apply/)