Lending Money to Your Own LLC

Yes, you can lend money to your own LLC, and it is a routine, fully legal way for owners to fund their business — but only if you treat it as a genuine loan rather than an informal cash transfer. That means a signed promissory note, a stated interest rate, a repayment schedule, and the money moving from your personal account into the LLC's business account and back the same way. Done properly, an owner loan (often called a "member loan" or "shareholder loan") keeps the transaction off your equity, lets the LLC deduct the interest as a business expense, and gives you a defined claim to be repaid. Done sloppily — no note, no interest, no records — the IRS and courts can recharacterize it as a capital contribution, which changes your tax picture and can undercut the liability protection that made you form the LLC in the first place.

Loan vs. capital contribution: why the label matters

There are two ways to put your own money into your LLC, and they are not interchangeable. A capital contribution increases your equity (your capital account) and generally is not repaid on a schedule — you get it back through distributions or when the business is sold or wound down. A loan creates a debt the LLC owes you: it sits on the balance sheet as a liability, it carries interest, and you are a creditor with a right to repayment.

The distinction drives real outcomes:

• Repayment. Loan principal comes back to you as a non-taxable return of capital; distributions may be taxable depending on your basis and the entity's tax election.
• Interest. The LLC can deduct loan interest as a business expense. That interest is taxable income to you personally — so it moves money, it doesn't erase tax.
• Priority. If the business fails, creditors (including you, as a lender) generally stand ahead of equity holders. But an owner's loan is often subordinated in practice, and courts scrutinize insider debt closely.
• Basis and losses. For a multi-member or S-corp-taxed LLC, whether you contributed or loaned affects your basis and your ability to deduct pass-through losses. This is worth a conversation with your CPA before you move the money, not after.

The label you write on the check does not control — the IRS looks at the substance. The single most effective way to make sure a loan is treated as a loan is to document it like one before the cash ever moves.

The paperwork that makes it a real loan

An owner loan is only as strong as its documentation. At minimum, put these in place:

• A written promissory note signed and dated, naming you as lender and the LLC as borrower, with the principal amount, interest rate, payment schedule, and maturity date.
• A market-rate interest rate. The IRS sets minimum rates each month — the Applicable Federal Rates (AFR). Charging at least the AFR for the loan's term keeps the arrangement from being treated as a below-market or gift loan, which can trigger "imputed interest" you'd owe tax on even if you never collected it.
• A clean money trail. Fund the loan from your personal account directly into the LLC's business bank account. Repay from the business account back to you. Never run it through cash or a personal card.
• Board/member consent if your operating agreement requires it — a short written resolution authorizing the loan protects you if a partner or the IRS later questions the transaction.
• Consistent bookkeeping. Record it as a loan payable to member (a liability), split each repayment into principal and interest, and issue yourself the interest income record your CPA advises.

The test regulators and courts apply is simple: would an unrelated third party have made this loan on these terms? If the answer is yes — real note, real rate, real payments — you are on solid ground.

Example: how a member loan looks on paper

The figures below are illustrative only, to show the mechanics — not a quote or a promise of terms.

Notice what's missing: any total-payback figure. That's deliberate. What matters operationally is whether the LLC's monthly cash flow can comfortably cover each payment — not a headline number. If the business can't service the payment out of revenue, the loan just moves a cash-flow problem from one pocket to another.

Decision framework: when a self-loan works — and when to avoid it

Lending to your own LLC is a tool, not a default. Use this to decide.

It works best when:

• You have idle personal cash you can afford to have tied up, and you'd rather earn interest from your business than leave it in a low-yield account.
• The need is short-term and specific — bridging a receivable, covering payroll before a big deposit clears, buying inventory ahead of a known sales cycle.
• The business has the cash flow to repay on schedule, so the loan smooths timing rather than papering over a losing model.
• You want to avoid diluting ownership or bringing in a partner just to add capital.
• You can document it properly and keep personal and business finances cleanly separated.

Avoid it — or think twice — when:

• The loan would drain your personal emergency reserves or retirement savings. If the business stumbles, you've now lost twice.
• You'd be funding operating losses with no clear path to the cash flow that repays you — that's not a loan, it's throwing good money after bad.
• You can't or won't paper it correctly, in which case the IRS may treat it as equity and the liability shield may weaken.
• The amount you need is larger than you can safely part with, and outside capital would let you grow without personal exposure.
• You need the money faster than you can free up personal funds, or the personal cash simply isn't there.

That last set of situations is exactly where outside financing earns its keep. If your business has steady deposits but you don't have — or shouldn't tie up — the personal cash, a revenue-based advance can fund the same need without touching your savings. See our pillar guide on business funding options for small businesses to compare paths.

When outside revenue-based funding beats a personal loan

A member loan only works if you have personal cash to lend and can afford to have it locked up. Many owners don't — or shouldn't. If your LLC is generating consistent revenue but your personal reserves are thin (or better left untouched), an outside revenue-based advance or MCA-style facility from a marketplace can fund the same gap while keeping your household finances intact.

The reason it fits owner-funding situations: these facilities are underwritten on your business bank deposits and revenue, not primarily your credit score. That's the opposite of most bank loans. Typical parameters through a marketplace look like:

• Approval driven by revenue and bank-deposit history rather than personal FICO alone.
• Personal credit as low as 500+ often still considered.
• Minimum funding around $10,000, scaling with monthly revenue.
• Funding in roughly 24 to 48 hours once documents are in.
• Repayment that flexes with sales — a share of daily or weekly deposits — so payments track your cash flow instead of a fixed personal outlay.

No responsible funder can ever guarantee approval — anyone who does is a red flag. But for an owner weighing "drain my savings vs. keep my cushion," outside capital that's repaid out of business revenue is often the more resilient choice. A marketplace matches your bank statements to multiple funders at once, which usually means better terms than chasing one lender. Compare it against a self-loan in our business funding pillar guide before you commit personal cash.

Common mistakes that get owner loans recharacterized

• No promissory note. A verbal "I'll pay myself back" is invisible to the IRS. Without a note, it reads as equity.
• Zero or token interest. Below-AFR loans can trigger imputed-interest rules, and a 0% "loan" looks like a contribution.
• No actual repayments. If money never flows back on the stated schedule, the debt characterization erodes over time.
• Commingling. Funding the loan from a personal card, or repaying to a personal account you also run business charges through, blurs the separation that protects you.
• Ignoring your operating agreement. Multi-member LLCs often require member consent for insider loans; skipping it invites disputes.
• Round-tripping to dodge tax. Structuring loans purely to move income around, without economic substance, is exactly what triggers recharacterization. Substance first, paperwork second.

None of these are hard to avoid — but every one of them is common, and each weakens the case that your loan is a loan.