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Bounce back loan scheme misuse

Jeremy Oddie and Julie Webster from the corporate recovery and insolvency team at Mitchell Charlesworth discuss bounce back loan misuse.

The bounce back loan scheme (BBLS) was made available to help support businesses during the Covid-19 pandemic and there are many SMEs across the UK who will now be starting to repay their bounce back loans as the year long payment holiday comes to an end.

As repayments kick in the Insolvency Service is warning that it may lead to an increase in directors and debtors reassessing the position of their business and considering formal insolvency, some as a way to avoid repayment.

The Insolvency Service is asking insolvency practitioners to be aware of issues that may indicate bounce back loan abuse, such as funds not being used for the benefit of the business; businesses overstating turnover by more than 25%, or a loan of more than 25% of turnover; businesses not trading in the UK or resident for UK tax; failure to disclose a BBL in a statement of affairs; or minimal creditors, which could suggest other creditors have been paid off.

Issues relating to sole traders include sole traders falsely declaring their trading start date or sole traders who were bankrupt, in an IVA or DRO at date of application. If insolvency practitioners have concerns that a business or company director has behaved fraudulently and abused government loans, they are asked to report it to the Insolvency Service to review.

The Insolvency Service is already taking action against those who have abused government support during the Cvoid-19 pandemic. There have been a number of reports in the media of fraudulent companies being shut down after abusing the BBLS.

Business owners who are struggling to meet repayments due under the BBLS or other pandemic support measures should speak to a professional advisor as soon as possible as early intervention is key to survival.

This was posted in Bdaily's Members' News section by Anne Griffiths .