Our company is lending money to another entity. We are going to charge interest and need to know what the minimum amount we must charge as per IRS guidelines.

ANSWER

The BIDaWIZ Team's Answer:

How long is the term of the desired loan? The IRS categorizes the length of loans in three categories: short-term, mid-term & long-term. Short-term means 3 years or less; mid-term means 3 to 9 years, and long-term means 9 years or longer. We would recommend that you charge an interest rate based on at least the Applicable Federal Rates (AFR) published by the IRS in the month that the loan is issued. This is also referenced in the Internal Revenue Code Section 1274.