A personal loan, not an investment
LendRight agreements are person-to-person: you lend to your nephew, not to his limited company. That’s usually the right shape anyway — repayment stays owed by a person you trust regardless of what happens to the venture, and you stay well clear of shareholder territory. If the plan is to put money into a company — a director’s loan, or equity — that’s a different instrument, and worth an hour with an accountant before anything is signed.
Money that stays clean
Keep the loan separate from everything else the family is contributing — the free labour, the spare room, the goodwill. The agreement covers one thing: this sum, this schedule. If the business is a sole trade, the person and the business are the same debtor anyway; if it incorporates later, the personal loan is untouched. And if you charge interest, it’s savings income in your hands for tax.
Example: £10,000 for the joinery business
Bill lends his nephew £10,000 to kit out a joinery workshop — van, tools, first materials. The agreement gives six months’ grace before the first payment (workshops don’t invoice in week one), then 24 monthly payments. It records the purpose, allows early repayment when the order book fills, and keeps Sunday lunch about the football.
If the venture flies, the loan is a footnote. If it doesn’t, the agreement is what keeps the money conversation short, kind and already answered.
What the agreement should pin down
- The amount and the date the money moves — with a payment reference on the bank transfer so the advance is provable.
- The repayment plan — instalments or a single date, and what happens if a payment is missed.
- Interest, if any. There’s no statutory cap between family members; the builder warns (never blocks) at 25%+. Remember interest you receive is taxable income.
- Loan, not gift — stated in terms. It protects the borrower’s siblings, the lender’s estate planning, and everyone’s memory.
- Signatures from both sides — electronic signing is valid in England and Wales, and it’s how LendRight finishes the job.
If repayment stalls
Money claims start online wherever you live — through Money Claim Online or the County Court Money Claims Centre — and claims up to £10,000 usually go to the small claims track, built for people without solicitors. If an in-person hearing is ever needed, it’s listed at a county court hearing centre convenient to the defendant, wherever in England and Wales they live. In practice, a signed agreement plus a bank record is usually enough to make the conversation end long before a courtroom.
Under the Limitation Act 1980 you generally have six years from a missed due date to bring a claim on a simple contract — one more reason the agreement should set real dates.
Scotland and Northern Ireland — a different story
If either of you lives in Scotland or Northern Ireland, the builder will tell you honestly that we can’t serve you yet — those are separate legal systems, and a template written for England and Wales isn’t automatically right there. Everything about that decision is on our coverage page.
Put it in writing — kindly.
Draft free in about 4 minutes. Pay the one-time £24.99 only when you send it for signing.
Create my loan agreement