Is Your Business Sale-Ready? Don’t Forget the Shareholder Loans

Before You List: Fix Shareholder Loans to Protect Your Sale Price

Buyers hate surprises. Tidy your shareholder loans and keep your exit on track.

When preparing your business for sale, there’s one item that often gets overlooked, shareholder loans. And yet, these can make or break your deal.

If your company’s balance sheet shows money owed by shareholders, it means you’ve borrowed from your own business. That’s not unusual ,it might have been to fund a property, pay down a personal debt, or cover drawings over time.

But here’s the catch:

When you sell your company’s shares, those loans must usually be repaid before completion. Buyers won’t take on your personal debt, and leaving it unresolved can create last-minute complications, tax surprises, or even kill a deal.

The good news? You have options:

• Repay the loan before the sale, so the buyer inherits a clean balance sheet.
• Declare a franked dividend (if retained earnings allow) to offset the balance efficiently. Also consider if there is third-party debt in the company to be repaid, and pay only a dividend that is the difference between the shareholder loan and the debt repayment, as this reduces the distribution and tax that comes with this. 

Each path has different tax outcomes, especially if you’re planning to access Capital Gains Tax concessions, so professional advice is key.

The takeaway:

A “sale-ready” business isn’t just about revenue or profit. It’s about tidy accounts, clear ownership, and no surprises for a buyer.
Sorting out shareholder loans early not only streamlines due diligence but can save you hundreds of thousands in tax when the deal is done.

Thinking about selling?

Talk to your accountant or advisor about your shareholder loan position before you go to market ,it’s one of the simplest ways to maximise your after-tax outcome and keep your sale running smoothly.