In many UK companies, directors frequently engage in lending or borrowing transactions with the business. Whether a director provides funds to support working capital or draws money for personal use against future earnings, these arrangements must be clearly documented. At the heart of that documentation is the director loan agreement — a vital contract that protects both the director and the company, clarifies terms, and reduces the risk of disputes or compliance issues.
Despite their importance, director loans are often handled informally or left to generic templates that fail to address the specific legal and practical requirements of such transactions. That’s why understanding what a director loan agreement should include — and having access to a reliable template — is essential for accounting professionals advising clients or managing corporate records.
What a Director Loan Agreement Actually Does
A director loan agreement formalises the terms under which a sum of money is loaned between a director and their company. Unlike a simple IOU or informal verbal agreement, a properly drafted director loan agreement sets out:
- The exact amount of the loan
- The repayment schedule and methodology
- Whether interest is payable, and at what rate
- Default provisions if repayment obligations are not met
- Governing law and dispute resolution terms
Lending between a director and a company may be practical, but without clear contractual terms, there is no shared understanding of obligations — opening the door to misunderstandings, disagreements, and potential issues with regulators such as HMRC.
Why Standard Loan Documentation Often Falls Short
Many firms attempt to document director loans using generic loan agreements designed for consumer lending, secured loans, or unrelated business transactions. While these may appear “good enough” at a glance, they often fail to address crucial elements unique to corporate and director loans:
- Accounting and tax treatment of director loans, which can differ from standard loans
- Board resolutions and corporate governance requirements for directorrelated transactions
- Documentation that complies with both UK company law and professional accounting standards
- Clarity around rights and remedies if the company or director defaults
A director loan agreement needs to reflect these specific considerations in order to be robust, enforceable and compliant with regulatory expectations in a corporate context.
Why FigsFlow’s Director Loan Agreement Template Stands Out
For accountants and corporate advisers who need highquality documentation without reinventing the wheel, FigsFlow offers a comprehensive director loan agreement template designed for realworld use.
Instead of generic or outdated forms, FigsFlow’s template:
- Is written in clear, professional language that reflects current expectations in the UK corporate context
- Covers essential clauses that protect both directors and the company
- Can be customised quickly to reflect the specifics of individual loan arrangements
- Provides a solid structure that aligns with compliance and audit requirements
Using this template means firms can produce polished, accurate agreements quickly — a practical advantage when multiple director loans are processed in a financial year.
Conclusion: Documentation You Can Trust
A director loan — no matter how straightforward it may seem — should never be left to informal notes or improvised contracts. A professionally structured director loan agreement ensures that both the company and the director have clarity on terms, liability, repayments and governance expectations.
For accounting professionals and corporate advisers, using a template that reflects current best practice and legal expectations isn’t just efficient — it’s responsible.
Explore FigsFlow’s director loan agreement template and empower your firm with documentation that’s clear, compliant and ready for action.
