What-is-deemed-Bounce-Back-Loan-fraud

Intended to be a lifeline for businesses struggling during COVID-19, Bounce Back Loans (BBLs) unfortunately became a target for fraud and misuse. Criminals exploited vulnerabilities to steal millions of dollars, while some businesses unintentionally misused the funds. This not only hurts the integrity of the program but also puts legitimate businesses at risk.

Fortunately, there are steps businesses can take to avoid misuse and protect themselves. By understanding what constitutes a misuse of funds and how to properly utilise the loan, businesses can ensure they are using these funds appropriately.

In this following section, we’ll disclose all about Bounce Back Loan fraud and misuse. We’ll explore how these issues arose, the risks involved, and how businesses can stay compliant!


When The Bounce Back Loan is deemed as misuse or fraud?

Misusing a Bounce Back Loan means not using it for business purposes. This could involve using the loan for personal expenses, investing it in non-business ventures, or spending it on things unrelated to your business activities. Such actions can lead to legal consequences and financial penalties.

Bounce Back Loan fraud or misuse can occur under various circumstances, including:

  • Providing false information on the loan application
  • Using the loan funds for personal expenses
  •  Investing loan funds in non-business ventures
  • Concealing relevant financial information
  • Diverting funds to offshore accounts
  • Making unauthorised payments
  • Engaging in criminal activities
  • Intentionally defaulting on loan repayment

Why Have I Been Accused of BBL Fraud?

Have you been accused of misuse or fraud for your BBLs? 

Hold on, there might be a misunderstanding about the Bounce Back Loan (BBL). Clear out why you could be facing accusations, even if you didn’t intend to commit fraud:

  • An honest mistake during application: Did you unintentionally provide inaccurate information or misunderstand the eligibility criteria?
  • Business not quite meeting the requirements: Perhaps there were technicalities about your business that didn’t align perfectly with the loan eligibility.
  • Misusing the funds: HMRC or the bank might suspect the loan wasn’t spent on legitimate business expenses.
  • Fake business or impersonation: In some severe cases, the accusation could be due to setting up a fake business or impersonating another to obtain the loan.
  • Applying to multiple lenders: Did you unknowingly apply for a loan with more than one lender?

Remember, even unintentional errors can trigger an investigation. It’s best to seek clarification on the specific reason for the accusation.


How do Bounce Back Loan investigations work? 

Bounce Back Loan investigations aim to uncover misuse of the funds. If you missed repayments, closed your business, or there were inconsistencies during your application, HMRC, the Insolvency Service, or your bank might investigate. 

They’ll request documents like bank statements to track how you spent the money. You may also be interviewed. If wrongdoing is suspected, further investigations, potentially civil or criminal, could follow. 

The Ratings (Coronavirus) and Directors Disqualification (Dissolved Companies) Act allows authorities to investigate directors of dissolved companies with outstanding debts. This can lead to disqualification and personal liability if you’re found to have dissolved the company improperly while still owing on the loan. 

Cooperating fully and providing clear evidence of legitimate business use strengthens your position throughout the process.


How to deal if I have been accused of Bounce Bank fraud?


If you’ve been accused of Bounce Back Loan (BBL) fraud, it’s essential to respond promptly and responsibly.  Here is how you can deal with the issue:

  • First, contact a solicitor experienced in financial crimes. Provide them with all relevant documents and details of the accusation. 
  • Avoid discussing the matter with anyone except your legal representative. 
  • Gather evidence to support your innocence, such as bank statements and loan applications. Cooperate fully with authorities but assert your rights. Keep calm and avoid making statements that could be misinterpreted. 
  • Understand the severity of the accusation and its potential consequences. Prepare for legal proceedings and follow your solicitor’s advice closely. Maintain transparency and honesty throughout the process. 


Exploring The Consequences if You Misused a Bounce Bank loan?

If you misuse a Bounce Back loan, there are several serious consequences you may face:

1. Financial Penalties

Misusing a Bounce Back loan can lead to substantial fines imposed by regulatory authorities. These fines are designed to penalize the misuse of funds and deter individuals from engaging in fraudulent activities. The amount of fines can vary depending on the severity of the misuse and may significantly impact your financial standing.

2. Director Disqualification

If you’re a director of a company that misuses a Bounce Back loan, you could face director disqualification. This means you may be barred from acting as a director of any company for a specified period, which can have far-reaching implications for your career and professional reputation.

3. Imprisonment

In cases of severe misuse or fraudulent activities involving Bounce Back loans, imprisonment is a possible consequence. Individuals found guilty of such offences may face imprisonment for a term determined by the court. This not only entails the loss of personal freedom but also carries significant social stigma and long-term repercussions.

4. Compensation and Asset Seizure

In addition to fines and imprisonment, you may be subject to compensation and confiscation orders. These orders require you to compensate victims or the government for any financial losses incurred as a result of the misuse of funds. Confiscation orders may also involve the seizure of assets to cover outstanding debts or penalties.

5. Serious Crime Prevention Orders (SCPO)

In cases where misuse of a Bounce Back loan is deemed a serious crime, you may be subject to a Serious Crime Prevention Order (SCPO). This order imposes restrictions and obligations on your activities to prevent future involvement in criminal conduct. Breach of an SCPO can result in further legal action and increased scrutiny by law enforcement agencies.


Bounce Back Loan Repayment: Can I Avoid It? 

No, you cannot avoid paying back a Bounce Back Loan.

Bounce Back Loans are a form of financial assistance provided by the government to support small businesses during challenging times, such as the COVID-19 pandemic. When you accept a Bounce Back Loan, you enter into a legal agreement to repay the borrowed funds along with any interest and fees incurred.

Avoiding repayment of a Bounce Back Loan can have serious consequences:

Legal Action: Lenders may pursue legal action to recover the outstanding debt, leading to court proceedings and potential asset seizure.

Credit Score Impact: Defaulting on the loan damages your credit score, making it challenging to secure future financing or credit.

Personal Liability: As a borrower, you are personally liable for the loan, even if your business fails.

Financial Penalties: Late payment fees, penalties, and accrued interest can compound the original loan amount, increasing your financial burden.


What if I  close my limited company with an outstanding Bounce Back Loan Debt?

Yes, you can close your limited company even with an outstanding Bounce Back Loan debt. However, the method you use depends on your company’s financial situation. Here’s a breakdown:

  • Company Liquidation: This is the most common option. A licensed insolvency practitioner will oversee the process, selling company assets to repay creditors, including the Bounce Back Loan.
  • Dissolution (Not recommended): This is only possible if your company has enough assets to pay off all debts, including the Bounce Back Loan. It’s a simpler process, but not suitable for outstanding debts.

Note: Directors are not personally liable for Bounce Back Loans if the company is liquidated through the proper channels.


How to close my limited company with my Bounce Bank Loan Debt?

Closing your limited company while having outstanding debts, such as a Bounce Back Loan, requires careful consideration and adherence to legal procedures. One common method for closing a company with debts is through a process called Creditors’ Voluntary Liquidation (CVL).

Here’s how the Creditors’ Voluntary Liquidation process works:

1: Assessment and Decision

You assess your company’s financial situation and decide that liquidation is the best course of action.

2: Board Resolution

As a director, you convene a board meeting to propose the decision to liquidate the company voluntarily. The board votes on the resolution and nominates a liquidator.

3: Creditors’ Meeting

 Notice of the creditors’ meeting is sent to all known creditors, along with a statement of the company’s financial affairs. At the meeting, creditors vote to appoint the nominated liquidator or choose their own.

4: Liquidation Process

The appointed liquidator takes control of the company’s affairs. They identify and sell the company’s assets to generate funds for repayment to creditors.

5: Repayment to Creditors

The proceeds from asset sales are distributed among creditors according to the statutory order of priority. Secured creditors are typically repaid first, followed by preferential and unsecured creditors.

6: Closure and Dissolution

Once all assets are liquidated and creditors are repaid to the extent possible, the liquidator applies to Companies House to strike off the company from the register. The company is officially dissolved, and the liquidation process concludes.


Seek Professional Advice From Vanguard Insolvency!

For expert guidance on managing your Bounce Back Loan and navigating potential financial challenges, seek professional advice from Vanguard Insolvency

If your company can consistently meet its Bounce Back Loan repayments, you’re not obligated to disclose how the funds were utilised. 

However, if circumstances force your company into closure with an outstanding Bounce Back Loan, investigations into fund usage may commence. Misusing loan funds for personal rather than business purposes can lead to personal liability for fraudulent behaviour.

Vanguard Insolvency’s experts can assist if you’re unable to repay your Bounce Back Loan or suspect misuse of funds. We offer tailored advice and explore viable solutions for moving forward. 

Contact Vanguard Insolvency today for immediate assistance and guidance on managing your Bounce Back Loan effectively.

Senior Partner at Vanguard Insolvency Practitioners | Website | + posts

I am an insolvency professional with a distinguished career specialising in commercial insolvency, adeptly navigating Creditors Voluntary Liquidation, Company Voluntary Arrangements, and Company Administrations. With a comprehensive understanding of insolvency laws and an unwavering commitment to ethical practices.