What is Bounce Back Loan Fraud and How Can I Avoid it?

If you used a Bounce Back Loan during the Coronavirus pandemic for reasons other than providing economic benefit for your company, you may have fraudulently used or obtained the funds. 

If you are concerned that you may have misused your loan, or you have been contacted about potential fraud, continue reading to find out more on Bounce Back Loan fraud. 

 

What is bounce back loan fraud?

When directors have used their Bounce Back Loan (BBL) for personal purchases, or for matters which did not financially benefit the business, this is classed as BBL fraud or misuse. 

It may also be the case that directors overinflated their companies turnover in order to obtain a BBL, or applied for a loan for a company created after 1st March 2020. This would likely be classed a BBL fraud, even if the funds were used for legitimate business purposes. 

Misusing or falsely obtaining a BBL is deemed as fraud and directors could face serious repercussions should the business be unable to repay the loan in the future, or enter a state of insolvency, such as Liquidation, as a result of the misuse. 

If you’re found guilty of misusing a BBL, you could be held personally liable as this is seen as fraud. You will be liable for repaying the loan, and you may even be investigated by Insolvency services and face fines or director disqualification. 

 

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Who is investigating Bounce Back Loan fraud?

UK authorities are conducting compliance checks and investigations to catch directors who have deliberately misused the BBL scheme. 

Any business that obtained a BBL should expect a compliance check from the bank as part of regular fraud investigations. 

Are HMRC investigating bounce back loans?

Yes, the government announced a new bill in 2021 that allowed HMRC and Insolvency Services to investigate businesses which deliberately abused the BBLs. 

HMRC have widespread investigation powers, including the ability to search your home and workplace, seize your electronic devices and make arrests. 

 

How Bounce Back Loan investigations work

If any evidence of wrongdoing is found, further investigations may be conducted, and depending on the nature of the allegations, it may either be a civil or criminal investigation. 

You may be investigated by the bank, HMRC or Insolvency Services if your company has been dissolved or entered a state of insolvency after you obtained the loan. 

The Ratings (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill was introduced to allow retrospective investigation and action to be taken against company directors. 

This can lead to disqualification and personal liability if they are found to have dissolved their company with outstanding debts. 

 

What is classed as misuse of a Bounce Back Loan?

There are different types of BBL misuse, and in many cases, the fraud will have occurred when the loan was used for personal support, rather than supporting the business. 

Misuse can include:

• Using the loan to purchase personal assets 
• Transferring a lump sum to personal bank accounts 
• Giving some or all of the money to friends, family members or third parties 
• Using the money to fund a substantial increase in directors salaries or dividends

 

BBL fraud can also include:

• Exaggerated turnover to obtain funds
• Not disclosing the company was facing financial issues when obtaining the loan
• Dissolving the business in an attempt to avoid repaying the loan
• Making multiple or fake options to obtain the loan
• Creating a new company to make a fraudulent application

 

What are the potential penalties for Bounce Back Loan fraud?

Using the loan fraudulently, or knowingly providing false and misleading information to secure a BBL could result in several fraud offences. 

If you are found guilty of BBL fraud, the possible consequences could include:

• Fines
• Director disqualification
• Imprisonment
• Compensation and confiscation orders 
• Serious Crime Prevention Orders (SCPO)

 

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Why am I being accused of BBL fraud?

If you are being accused of fraud, it may be caused by an error made when you were applying for the loan. Some other reasons why you may be accused of BBL fraud could be because:

• You applied even though you weren’t eligible 
• You started a fake business to claim the loan
• You impersonated an existing business
• You applied to multiple lenders for the loan
• HMRC or the bank suspects the loan was misused 

 

What to do if you have been accused of Bounce Back Loan fraud

Across the UK, numerous banks lent billions of pounds to businesses for a BBL. These banks are now employing fraud investigators to track down businesses that exploited the scheme in order to reclaim the money they lost. 

If your business has been accused of BBL fraud, it is crucial you seek expert help immediately. At The Insolvency Experts, our team of expert advisors are here to provide you with the help and advice you need during these challenging times. 

We will take the time to assess your situation and help you understand all the options open to you. 

Contact us today to see how we can help you.

 

Can you avoid paying back a bounce back loan?

The only way to avoid paying back a BBL is if your company is facing some form of formal insolvency process, such as Liquidation. Technically as there is no personal guarantee attached to the loan, you won’t lose anything and it will not directly affect your credit score. 

However, if you are able to repay the loan but choose not to, banks have stated that they will chase unrepaid BBLs in the same way they would try to recoup any other unsecured loan. 

This could include dealing with bailiffs, debt collection agencies and court action. Read our guide on liquidating your company with a Bounce Back Loan to find out more.