Understanding Bounce Back Loan (‘BBL’) Fraud

Many small and medium-sized businesses applied for a Bounce Back Loan (‘BBL’) following its introduction in May 2020, and over 900,000 loans, totaling around £38bn, were approved. The loans helped keep afloat these businesses during the Coronavirus pandemic, although there have been many reports of BBL fraud.

It is vital that companies and their directors don’t inadvertently create an issue by not realising the potential consequences of what you do with this money.

Any misuse of the scheme could result in prosecution for fraud, as confirmed previously by HM Treasury.

What does misuse of the scheme actually mean?

The funds should be used for the company’s benefit only. It goes without saying that directors should not use the funds for personal use or transfer the funds to personal accounts. Car dealerships were reporting following the introduction of the BBL scheme that their customers were openly stating that they were using BBL to fund purchases of cars for personal use. There have also been multiple news stories of BBL being used for home improvements and gambling.

Directors need to take care if taking dividends from a company using Bounce Back Loan funds when the company might be deemed to be insolvent. A dividend paid from an insolvent company may also need to be paid back if the company enters a formal insolvency process.

Check if your company is insolvent – does it have enough assets to cover its liabilities? Can the company make payments to its creditors as they fall due?

Directors also need to ensure that they’re not prioritising loans from the company to themselves over payments to the company’s creditors. 

Other examples of BBL scheme scams

  • Applying for a BBL for a dormant company or where the company has ceased to trade.
  • Overstating turnover in the application.
  • Making an application for a BBL with no intention to carry on trading after receipt of the funds.
  • Knowledge of insolvency when making the application.

Insolvency Services – areas for concern

The Insolvency Service will consider the following matters when reviewing a company which has an outstanding BBL, where:

  • multiple applications by a single director or throughout a group of companies.
  • there is an outstanding Directors Loan Account or where a dividend has been paid close to insolvency.
  • no attempt has been made to repay a BBL.
  • other Government Support was received during the pandemic.
  • assets were acquired with the support funds.
  • funds used for personal use.
  • funds paid to the company and then transferred to another account.

Do you have any concerns over your company’s BBL use, the application or any other insolvency-related concerns? Call our insolvency experts today on 0141 221 2984 for free advice.

How we can help

Our expert team of licensed Insolvency Practitioners and staff can discuss the options available to your and we are here to support navigate you through this. To find out more please contact us here. Or if you prefer an initial chat, contact Sonya Stevenson on 07971 607 014 or e-mail s.stevenson@frenchduncan.co.uk.

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