Can my SEIS or EIS investor loan money to my company?

📘Overview

In principle, an investor can lend money to your company and also invest under the SEIS or EIS schemes. However, there are strict conditions and several common pitfalls that must be avoided to ensure both arrangements remain compliant with HMRC rules.

The key is that the loan and investment must be entirely separate, both legally and financially.

🔍 Key Conditions

To stay compliant, make sure the following conditions are met:

1. Keep the Investment and Loan Completely Separate

The EIS or SEIS investment and the loan must be entirely de-linked and not conditional on each other in any way.

💡 Tip: Have a properly drafted loan agreement that clearly states this separation. Both parties should acknowledge that the investment and the loan are independent.

2. Use Commercial Loan Terms

The loan must be on normal commercial terms, similar to what an independent lender or bank would offer.

This means:

• A market-rate interest (if applicable)
• Defined repayment terms
• No preferential treatment or unusual conditions

If HMRC believes the loan is being used to reduce investor risk or artificially structure the investment, the EIS or SEIS relief could be withdrawn.

3. No Conversion of the Loan into Shares

The loan cannot later be converted into EIS or SEIS shares.

Doing so would make the investment ineligible for tax relief, as HMRC would treat it as a pre-arranged investment rather than a qualifying subscription for shares.

4. EIS or SEIS Funds Cannot Repay the Loan

You cannot use EIS or SEIS investment proceeds to repay the loan.

Funds raised under either scheme must be used for qualifying business activities that promote growth and development, not for repaying existing debts or financing arrangements.

5. Maintain Clear Financial Separation

💡 It’s good practice to use separate company bank accounts for loan and investment funds.

This demonstrates transparency and helps you provide clear evidence if HMRC later reviews your records.

You should also disclose the existence of the loan in your advance assurance application if applicable, so HMRC is aware of both funding sources.

✅ Summary

💡 Keeping clear documentation and separation between funding sources protects both the company and the investor from compliance issues.