During the pandemic, businesses were fuelled with Government Bounce Back Loans (BBLs) to provide cash flow and survive the unprecedented trading conditions imposed by Covid-19.
Although this provided a much-needed helping hand to businesses on edge, some companies made the foolish decision to inflate their forecasted turnover figures or even reported a falsely forecasted turnover. All of this to take advantage of the scheme, and now officials are fighting back.
In particular, new legislation has been introduced to grant The Insolvency Service special retrospective powers to investigate directors for BBL fraud even after the company has been struck off.
As a result, the Insolvency Service is preparing to actively prosecute BBL fraudsters who have dissolved their businesses despite being suspected of fraudulently obtaining Bounce Back Loans or actively disregarding the strict terms under which the loans were granted.
These recent investigations have started to have an effect. Banks such as Lloyds and The Bank of Scotland, among others, have begun issuing demand letters for full repayment of the BBL within 14 days, claiming that “some of the information provided was inaccurate or misleading… which means the BBL agreement has been broken.”
Click here to see a letter shared by Companyrescue.co.uk
Participating lenders in the BBL scheme have lent £46 billion in loans to date.
What constitutes Bounce Back Loan misuse?
A Bounce Back Loan can only be used to benefit the business and cannot be used for personal purposes.
When applying for a Bounce Back Loan, business owners were told to declare that their company had been “adversely impacted” by the coronavirus pandemic, but not that it was in financial trouble. If a company was in financial difficulty when it applied for a Bounce Back Loan, it should have pursued an insolvency procedure.
It should be acknowledged that the current economic climate has put companies under undue, unprecedented pressure. But the pressure was so intense that a small number of owners (who were probably always dishonest in the first place) resorted to desperate and illegal measures, looting what the government intended to be urgent financial relief in a national emergency. Perhaps, quite predictably, the price to pay for Bounce Back Loan fraud is harsh and heavy. And it is a price that applies to all limited companies, including sole director contractor firms.
This means that guilty directors who went rogue could face director disqualification, which could result in losing the right to become a company director for up to 15 years, as well as the possibility of a prison sentence. If you are found to have abused your Bounce Back Loan, you may be held personally liable for the business debt!
How can DataGardener help?
Protect your Operations and Manage Risk More Effectively
DataGardener enables lenders to quickly and strategically measure risk, optimise, and streamline their processes. It provides extensive capabilities at every level of your analysis:
- Access over 1 million Charge records
- Enhanced search capabilities through charge-type keyword tagging
- Filter by the lender, type of charges, turnover, industry, region, year of charge registration and renewal month
- Predict or know if a company is in distress and take action
- It promotes transparency, improves risk management, provides customer insight and simplifies entry into new markets or business lines.
Prospect in the Lending Market
If you are a lender looking for companies that could be looking for a loan or a refinance opportunity, look no further; DataGardener can provide all this intelligence in one single platform.
Are you an Insolvency Expert?
Are you looking for companies in distress that need your expertise?
No matter who you are looking to target, we can help you find prospects by using our advanced search capabilities.
Leave a Reply
You must be logged in to post a comment.