Borrowing money from family or friends

Make clear agreements

An ‘informal’ loan from family or friends who want to invest in your idea or business can be a solution. Make sure you make clear agreements about the loan amount, repayment, and the terms and conditions of the loan.

Borrowing money from family or friends is also known as a private loan (onderhandse lening). It is a special loan just for you, because the loan is not offered publicly through a bank or financial institution.

With a private loan, make sure you set out the agreements clearly in a contract. This is called a private deed (onderhandse akte). It must contain at least the following information:

• who the borrower and lender are
• the loan amount
• how much interest (or other compensation) must be paid
• how repayment is arranged
• how will you receive the money?
• when does the loan need to be fully repaid?

You must also make agreements in the contract about:

• the consequences if repayment is not possible
• (interim) termination
• early repayment
• whether or not other loans may be taken out during the loan period

You can draw up and sign the contract together. But you can also have the agreement recorded by a civil-law notary. This notarial deed serves as proof for the Tax Administration in case they consider the loan to be a gift.

Private loans and tax

If the lender charges interest on the loan, the interest rate must be the same as a bank would charge. Your family or friends may be willing to grant you the loan without interest. Or at a lower interest rate (PDF, in Dutch) than a bank would charge. This gives you an interest advantage. The Tax Administration consider this interest benefit to be a gift. Giving money as a gift is tax-free up to a certain amount (in Dutch). If you exceed the gift tax exemption, you will have to pay tax on this benefit.

Read more about gift tax (in Dutch) on the website of the Tax Administration.

With the notarial deed, you can show the Tax Administration that it is a loan and that the interest rate meets market conditions.

Consider what happens if things go wrong

You are borrowing from someone with whom you have a close, personal relationship. What happens if things temporarily take a turn for the worse and you are unable to repay the loan for a few months in a row? This can also cause financial problems for your family or friends. And think carefully about how this could affect your relationship with them.