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A client takes an not needed Cbils loan - immoral?

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So I have a client in manufacturing. Since the lockdown his sales have shot up with a best ever profit month in May. The highest for 4 years! Reason is big orders due to Covid. His cash surplus in the bank is the highest for the past 10 years. Its high!

Now the client wants to borrow a Cbils loan (£180k + £300 OD facility) and if he can get away with it a BBloan as well. There is no justification from a cash flow view point even with a pessimistic outlook due to the uncertainty. His reasons?

  • The Cbils loans are meant by Gov for funding growth. (He will not accept my comment that the clue lies in the name of the loan)
  • I like a lot of cash as unsure about the future despite your advice Mr Expert on finance
  • I can save a lot of interest if I use the money to pay off the long term loans I have.
  • The banks want to lend so why not take it.
  • Others have done so in a similar situation and they got the money
  • I can always pay it back if I dont use it.

Now I have a moral issue with it as not needed. On the contrary he is now so cash rich its unbelievable. 

Am I being silly? And if not what advice on any action.

Note as I wish to remain anonymous will not respond but definately read. Thanks.

 

Replies (12)

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By Truthsayer
17th Jun 2020 10:22

If the client has lied in any part of the application process, you should submit an SAR. It is not relevant whether you consider his actions immoral, it only matters whether they were illegal. It is irrelevant whether you feel he needed the cash or not.

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Replying to Truthsayer:
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By AndyJR81
17th Jun 2020 10:39

Quote:

If the client has lied in any part of the application process, you should submit an SAR. It is not relevant whether you consider his actions immoral, it only matters whether they were illegal. It is irrelevant whether you feel he needed the cash or not.

This. He would have to self-certify that the business has been adversely affected by Covid-19. If it hasn't and he lies or submits false figures them that's worse than immoral, it's fraudulent. If he proceeds in that way you will probably need to have a chat with your ML supervisory body.

Tread carefully!

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By Mr_awol
17th Jun 2020 10:28

Clients of mine who have obtained CBILS funding have had to provide some quite detailed financial information. You would have thought that the banks administering the loans would have been told to look for evidence of need. I'm not sure they have.

I've had clients asking how they can 'get their hands on some of this free money'. I have explained it's a loan so not actually free and that's put most of them off. Only a couple have gone for it without any need whatsoever and both went down the bounce back route for small loans so I haven't really given it too much thought if I'm honest.

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By jonharris999
17th Jun 2020 11:10

I think your qualms here are largely unnecessary unless you have actually seen (or know about) a statement made to the bank which you know or suspect is false.

The Covid19 disruption has altered the financial landscape for myriad businesses. It is perfectly in order for them to apply for CBILS to support their growth, always provided questions are answered honestly and statements made truthfully. Merely being temporarily cash-rich is not a disqualification. Who knows where anyone's business will be in 6 months' time?

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RLI
By lionofludesch
17th Jun 2020 11:42

With a bit of luck, he'll find that his company is designated an "investment company", with all that that entails.

I can't see this being something that warrants an SAR. Whether I'd want to deal with this client is something I'd be pondering.

Thanks (1)
Flag of the Soviet Union
By thevaliant
17th Jun 2020 11:41

Stepping away from the legality, or accountancy for a moment:

I've had one client request the small business grant relief of £10k. They've never been more cash rich due to Covid-19. But its free, they're entitled to it, they don't have to repay it, and they think, "Why not?".

I must admit, I have moral issues with what they've done. Especially as this £10k is from the local council, and MY local council too (we live in the same area). It means next year my council tax will be increased to pay for this £10k that my client didn't need.......

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Replying to thevaliant:
RLI
By lionofludesch
17th Jun 2020 11:48

Quote:
It means next year my council tax will be increased to pay for this £10k that my client didn't need.......

As far as I recall, this money came from central government and the councils just doled it out.

Given the contraction of the UK economy, I can't see any attempt to recoup this money through taxes in the next five, ten, maybe more, years.

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Replying to thevaliant:
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By legerman
17th Jun 2020 12:46

Quote:

Stepping away from the legality, or accountancy for a moment:

I've had one client request the small business grant relief of £10k. They've never been more cash rich due to Covid-19. But its free, they're entitled to it, they don't have to repay it, and they think, "Why not?".

I must admit, I have moral issues with what they've done. Especially as this £10k is from the local council, and MY local council too (we live in the same area). It means next year my council tax will be increased to pay for this £10k that my client didn't need.......

The small business rates relief grant has no criteria attached to it, it is a given right to all businesses that have a rates bill up to £15k, even if they don't actually pay due to the relief. I claimed it, even though I've not been affected by covid work wise.

It hasn't cost the council a penny, other than perhaps the admin required to give out the money.

Thanks (2)
Replying to thevaliant:
blue sheep
By NH
19th Jun 2020 10:17

Moral issues with accepting a grant that is rightfully yours? I dont get your reasoning there.

I also really wish people on here would stop saying things like "morally right or wrong" as if your idea of what is moral or not is superior to others - leave morals out of it please, we deal with legalities without making moral judgements.

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Psycho
By Wilson Philips
17th Jun 2020 12:39

If the bank is switched on, and if he provides them with accurate information, I would expect the bank to turn him down and suggest a normal commerical loan instead. At least 2 of my clients found themselves in that position.

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By Paul Crowley
18th Jun 2020 05:11

It is a loan not free money
I would only be concerned if there was deliberate intent not to repay. But then, how would I know that?

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By markabacus
22nd Jun 2020 09:08

You say some at least will be to pay off existing loan[s]. I've not checked but fairly sure one of the purposes you cannot use CBILS or BBBL for is to pay off existing debt.

Also you can have either CBILS or BBBL but not both

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