Bounce Back Loan misuse

A governmental scheme, announced earlier this year, is going to clamp down on business owners who have misused funds from the Bounce Back Loan Scheme. 

The Public Sector Fraud Authority (PSFA) was created earlier this year. It is made up of experts who are aiming to reduce the impact of public fund misuse following a collation of £1.1 billion fraudulent bounce back loan exploitation. Overall, 1.5 million bounce back loans were issued, equating to £47 billion in taxpayer funding. 

Business owners who acquired a bounce back loan should not worry about these latest measures. However, those who deliberately went against the rules and regulations will now be placed under scrutiny. 

When bounce back loans were introduced in March 2020, the government provided full security to lenders if they were unable to make the necessary repayments. Directors did not have to pay a personal guarantee. 

If a business cannot recover from the impact of the pandemic or it suffers further financial issues later down the line, the responsibility of repaying the bounce back loan will remain in the hands of the business. Nonetheless, there are some situations where the director could be held personally liable. 

A company must be able to show that the bounce back loan it acquired was in line with the lending criteria. Equally, funds that were taken must have been used to provide a financial boost to the business. They were not meant to be used for personal gain. 

Companies that become insolvent are entitled to government intervention when it comes to bounce back loan repayments, ending any bounce back loan liabilities. However, those who did not follow the rules of the system accordingly could be made personally liable for the debt.

Directors also risk the threat of being disqualified for a number of years. One in three directors who were disqualified in recent months were found to have abused the bounce back loan scheme. Some of these directors have gone on to face criminal charges. 

If a business is still viable, it could be salvaged through a Company Voluntary Liquidation (CVA) or Administration. These liquidation solutions allow for the possibility of trading while making affordable payments to unsecured debts. 

Business owners faced with a mounting debt will have to explore the process of liquidation. Another option if a Creditors Voluntary Liquidation (CVL). Each solution has its pros and cons and you should get in touch with us if you want some guidance on which pathway is best for you. 

For help with insolvency schemes, call us at 0800 088 2142 or email us at info@businesshelpline.uk