Bounce Back Loans: what you need to know

To some, the COVID-19 pandemic and national lockdown is a distant memory, impacting our lives for almost two years, even though most only envisaged the initial lockdown lasting a couple of weeks.

In Spring 2020, the Government introduced the Bounce Back Loans Scheme (BBL), promoted as quick and easy-to-access low interest rate loans from £2,000 up to £50,000, which were made available to small businesses that had been adversely affected by COVID-19. As with any loan, there were certain conditions to comply with.

Out of the £47 billion paid out in BBLs, the Department for Business, Energy & Industrial Strategy (BEIS) estimate the fraud losses total £4.9 billion. The Insolvency Service has since warned that any company who fails to repay the loan may be investigated, even if the company has been dissolved. Action will be taken against a director and/or company should the following types of misconduct be identified:

• Providing false information on the loan application (e.g. overstating turnover, or the company ceasing to trade prior to the application being submitted).
• Utilising the loan for personal benefit.
• Dissolving the company to avoid repaying the loan.

Should it be determined that misconduct has taken place this could result in one or more of the following:

• The company being wound up by the court or a bankruptcy order being made against a sole trader.
• Potential disqualification as a director for between 2 and 15 years (maximum to date has been 13 years) or bankruptcy restrictions for a sole trader (extends the restrictions imposed on the bankrupt for a further 2 to 15 years).
• A court order requiring compensation to be paid to the creditors (compensation order).

Should a company have entered a liquidation process prior to the Insolvency Service carrying out an investigation, the BBL will be automatically reviewed by the liquidator as part of their statutory investigations, and any findings of misconduct will be reported to the Insolvency Service. Claims may also be brought against the director by the liquidator.

If you have any concerns regarding your company’s finances, including its ability to repay monies due under the support schemes provided, please contact our business recovery and insolvency team at Moore Kingston Smith. We can help ensure reasoned solutions, providing down-to-earth advice and support throughout the process.