NewsCovid loans used to buy houses and cars

Covid loans used to buy houses and cars

Abuse of covid-19 bounce back loans saw company directors spending the funds on luxury cars, deposits for house purchases and even a jet ski

 

A lack of checks on claimants for bounce back loans meant that unscrupulous business owners were able to take out loans without any intention of using them to support their businesses.

How many fraudulent bounce back loans have been estimated?

With an estimated £4.9bn loss due to fraudulent use of the bounce back loan scheme (BBLS) and the Coronavirus business interruption loan scheme (CBILS), Real Business Rescue has surveyed over 50 insolvency practitioners to uncover the ways business owners and stakeholders misused Covid-19 loans.

In one instance a director spent the full £50,000 on a Range Rover, claiming it was a grant, not a loan, while another spent the full loan amount on a jet ski and a deposit on a buy-to-let property. The abuse was not limited to material goods with another director spending £22,000 on a ‘redundancy payment’ to the wife of a director, who wasn’t actually employed by the company.

Other loans were claimed for non-existent businesses with a £25,000 loan given to a director despite the business being dissolved two years earlier

There are also many instances where tens of thousands of pounds were sent to family members abroad within days of receiving the bounce back loan.

The loans aimed at larger businesses were also used fraudulently. In three months, a director spent £250,000 of a Coronavirus business interruption loan on a £12,000 car deposit, £6,000 on an engagement ring, payments to his parents and partner, large amounts on pornographic websites and multiple unexplained cash withdrawals of £500.

Coronavirus business interruption loan schemes and bounce back loan schemes have played a pivotal role in helping businesses stay afloat these past two years. However, whilst the majority were taken out in good faith to help withstand the effects of the pandemic, – sadly – in some cases, these loans designed to keep businesses going, and people employed, have been grossly misused.

If a liquidator uncovers fraud or misuse of bounce back loans or the CBILS, they will look to recover the loan from the director – if they are found to be a breach – by way of misfeasance action. The director would potentially face a heavy fine and a possible disqualification from the Insolvency Service.

Covid loans used to buy houses and cars
Covid loans used to buy houses and cars

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