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Bounce Back Loans: It’s payback time


As the government launches a £25m “fraud squad” to crack down on fraudulent Bounce Back Loans, banks urge struggling companies to go into insolvency.

3rd May 2022
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It is now estimated that £10.6bn has been lost to fraud within the Covid-support programmes. This is due to criminal activity and inappropriate use by some directors of the Bounce Back Loans (BBLs) and other support schemes designed to help companies survive and restart their businesses post-pandemic.

As Chancellor of the Exchequer, Rishi Sunak, announces plans for a £25m “fraud squad” and the creation of the Public Sector Fraud Authority (PSFA) that will be run through the Cabinet Office to crack down on Covid-support abuse, some banks are urging companies who are struggling to repay loans to go into insolvency.

“Rishi Sunak was extremely generous in keeping the economy afloat and making sure that there wasn’t an absolute disaster, and we have seen a lot of genuine companies benefit from the BBLs and bounce back. But we have also seen a lot of companies that were probably doomed to fail anyway, that have just had their lifespan extended unnecessarily, and we need to look at those and assess for wrongful trading,” explains John Bell, senior partner, Clarke Bell Insolvency Practitioners.

Unsecured debt

Despite the BBLs being 100% guaranteed by the government, when a company goes into liquidation it becomes an “unsecured debt” and as such is not secured against any of the company’s assets. Therefore it can effectively die within the company.

“However, directors can still be held personally liable if they’ve committed misuse of Covid-support funds,” warns Lisa Thomas, insolvency practitioner at Neville & Co who has a YouTube channel to inform and engage with businesses and their accountants. “First, we need to check whether or not they have committed fraud in respect of the initial application for the loan. Secondly, we check whether the company met the criteria in the first place – whether the company was already in difficulty on 31 December 2019, and whether it was being adversely affected by the pandemic.”

Forced liquidation

As pressure mounts on banks to encourage companies to repay BBLs in a timely fashion, some fear that it will trigger a spate of forced liquidations by the banks in order that they can call in the guarantees from the government.

“The banks are required under the Bounce Back Loan scheme to make reasonable efforts to collect the debt from the borrower before claiming under the government guarantee,” explains Nick Hood, senior business adviser, Opus Business Advisory Group. “If the directors decide to put the company into liquidation, the likelihood is this will tick the necessary boxes to trigger the guarantee and an eventual recovery for the lender.

“The big question is whether liquidation is necessarily the right exit route for the business and its various stakeholders, particularly its employees, suppliers, and landlords. What is convenient for the lender may not work so well for them given the very poor returns for unsecured creditors in liquidation scenarios,” continues Hood.

“Under normal circumstances, lenders would want to take control of the situation by appointing administrators to try to rescue the business and/or maximise its recovery on their loans, but with BBLs, the banks were not allowed to take any security, so they have no simple mechanism to do so. They have no interest in committing scarce resources to helping the struggling business, because many feel that they can turn instead to the 100% government guarantee on the loan and get their money back that way.”

According to The Bounce Back Loan Scheme: an update from the National Audit Office, the terms of the guarantee require lenders to take “reasonable steps” to recover overdue payments. However, if a lender makes a claim on the loan guarantee, but afterwards an audit by The British Business Bank finds that the claim was made fraudulently, in bad faith, or other than in compliance with the guarantee terms, the lender is required to reimburse the government.

Trouble on the horizon

The spike in insolvency stats for March is alarming and an indication that there is trouble on the horizon.

“Throwing cheap money at struggling businesses on a ‘no questions asked’ basis was never going to end well,” says Hood. “Piling £47.4bn onto the balance sheets of 1.6m businesses at a time of gross financial and commercial disruption was a worthy attempt to stop viable entities from failing unnecessarily, but the consequences for some are looking increasingly dire.” 

Reports of BBL fraud are on the rise, and The Insolvency Service is being quick to name and shame those in its director disqualifications database. “We have seen a lot of cases where BBLs have been used inappropriately: directors have bought cars, watches, jewellery, paid personal credit card debts etc,” says Bell. “They seem quite astounded when we tell them they will have to repay that personally – naively they assume it will be covered by the government guarantee.”

Insolvency practitioners get to see and hear it all. For some, BBLs have been a feeding frenzy where people thought: “Whoopee, free money”. As one IP told me recently, they had one guy come to them and say that he had “loaned the money to a fellow in the pub, who was going to invest it for him, and he had run off with the money.”

One can only assume the “investment” was on the 2.30 at Kempton!

Replies (21)

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Danny Kent
By Viciuno
03rd May 2022 14:10

"Reports of BBL fraud are on the rise, and The Insolvency Service is being quick to name and shame those in its director disqualifications database."

This is the elephant in the room in my opinion. They need a bigger stick. Or something like the London Gazette, but more targeted - like posters up in your local Tesco with your picture and a note of how much you stole and what you spent it on, or it is automatically added to all your social media accounts.

For most people (myself included), who cares if your on that database? Most haven't heard of it and it probably doesn't effect your life in any meaningful way.

People who end up on the list will probably have no issues using work arounds to get around whatever limitations it is meant to put in place.

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By Justin Bryant
03rd May 2022 14:28

Yes; it's been stated here many times that fraudsters don't give a monkey's about having their wrist slapped by the Insolvency Service and who can blame them (in fact, they probably can't believe their luck that that's the worst that can happen)?

As for this:

“They seem quite astounded when we tell them they will have to repay that personally – naively they assume it will be covered by the government guarantee.”

Who's being naïve here? There are not enough insolvency staff to do that for all the 1,000s of fraudulent & dodgy BBLs and the paltry £25m is certainly nowhere near enough to resource this properly.

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Replying to Justin Bryant:
By ireallyshouldknowthisbut
03rd May 2022 16:23

The £25million shows how seriously this is being taken. The Con's spend more than that just to make a joke during the budget speech.

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the sea otter
By memyself-eye
03rd May 2022 15:37, watches, jewellery: pah!

I bought a narrowboat with mine!

(only kidding - it was a speedboat - I bought the narrowboat from furlough funds)

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By Hometing
03rd May 2022 16:28

You could increase that budget tenfold and they will still make a massive hash of it.

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By sanjay100
03rd May 2022 21:49

Wow disqualification the directors are literally laughing all the way to the bank. Its just joke punishment. A few of these fraudsters are abroad anyway.

Who says crime doesn't pay !!

No one cares as its not their money neither the banks and government. Its the greatest cash giveaway ever.

Bonaza for insolvency practitioners too as these sole director companies who just started at the time of the BBL will be flush with cash. Life is indeed unfair

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By Ben Alligin
04th May 2022 10:23

You only need to find 500 cases of fraudulent BBLs to cover the costs of £25m, so why doesn't Rishi put this out to tender for accountants and we keep 50% of any funds recovered. Sure as heck they take no notice of any SARs reports we give them, easy money to recover and they do nothing except write more legislation promising longer prison sentences for accountants failing to report.

There should be a reciprocal law for civil servants failing to act on submitted SARs reports, maybe 10 years inside and forfeiture of their pension would encourage the poor souls.

What a waste of £25m.

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By rememberscarborough
04th May 2022 11:23

Suspect if the government hadn't provided all this "support" there was a severe risk of a total collapse of the economy and that would have cost us substantially more than any BBL defaults.

That we're still here and pretty much back to normal probably suggests they got it right regardless of the cost.

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By indomitable
04th May 2022 12:27

Whole thing is a complete farce.

The BBL scheme was a knee jerk panicked reaction bought in during a crisis. Ill thought out, oblivious to the consequences.

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By moneymanager
04th May 2022 12:42

Was any "Covid support" really intended to support the economy or its recipients, was any of it actually needed in the first place, if you consider that even the John Hopkins conducted a meta analysis which showed that ALL the "lockdown measures" (a term used in prisons) only perhaps accounted for a change in outcomes of a mere 1% I would say a resounding no.

Look at the ONS which proves beyond doubt that Patrick Swayne was correct when he was lambasted by Gove, Rayner, and that laughable CCDH (if the conseqeunces of its activities were not so serious) for suggesting that data waas being manipulated, the typical comparator for mortalities were are given isa five yrar rolling average which (for the all cause age adjusted mortalities per capita) DOES show an uptick of some 12.5% of 2020 0ver 2019, what that truth conceals is that the same figure for 2020 is actually LOWER than all nineteen consecutive years from 1990 to 2009, look at the longterm statistics per nation globally, quite simply there was no "pandemic" other than one of manufactured "cases"which were not ill people but merely the results of the highly innapropriate use of a laboratory research tool (PCR) deployed for clinical diagnostics. What we have NOW is a pandemic of the most gross consequential, I hestitate to use the bellittling term of "collateral", range of damages possible from retarded child development and massive child and adoloscent psychological damage running all the way through to supply chains that have possibly been near irrevocably damaged before grave effects are endured, inthe context, BBL fraud is a drop in the ocean.

One must ask as to whether people in government are really that thick or are they just mendacious?

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Replying to moneymanager:
By Latinaid
04th May 2022 17:16

moneymanager wrote:

Was any "Covid support" really intended to support the economy or its recipients, was any of it actually needed in the first place

Some of my clients could not have survived without SEISS - driving instructors and tattoo artists, for instance - unable to work for more than half of the 20/21 tax year.

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Replying to Latinaid:
By moneymanager
06th May 2022 00:02

I didn't mean that such mechanisms hadn't provided essential cashflow (to those who could limbo under the qualifying hurdles) but rather were the compulsory business closures, and that of the wider society, every warranted in the slightest, were they even really legal, there was zero analysis of the consequences, zero analysis of their financial and other costs, recipients of BBLs in the catering trades were specificall prevented from bouncing back by one if not two extensions to closure mandates.

The legislation that was relied on from the start speaks of the closure of contaminated vessels and premises and the isolation of identified sick, not the incarceration of an entire population.

Faucci said at outset that, masks don't work, closures were unneccessary, and that there would be no federal mandates, "Two Weeks to Flatten the Curve" morphed into "Two years to Crush the Economy and Destroy a Functionning Society" and we are seeing the evidence of that now, supply chains are shot, farmers are not planting because of fertiliser shortages and the Ukraine and Russia have been taken "off stream" as to their grain, give it five to six months, buy a helmet.

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Replying to moneymanager:
By Dr Fauci
04th May 2022 22:05

The thing is that you can't have a normal conversation about this without being called a conspiracy theorist.

The Great Reset is very real.

The World Economic Forum is very real.

The WEF is very proud of its penetration of Western democratic political cabinets:

To not find the last 2 years extremely sinister is akin to a boiling frog thinking all is cozy....

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Replying to Dr Fauci:
By stepurhan
05th May 2022 11:27

Dr Fauci wrote:

The thing is that you can't have a normal conversation about this without being called a conspiracy theorist.

Neither of the websites you linked to look like they are run by people trying to have a normal conversation. (What the heck is arbortifa?) I also cannot help thinking taking the username "Dr Fauci" is not helping your credibility here.

If you genuinely want to have a normal conversation and not be seen as a conspiracy theorist you are definitely going about it the wrong way.

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Replying to stepurhan:
By moneymanager
06th May 2022 00:29

If you want to learn about Anthony Fauci you could start with two things, go to and Robert Kennedy jnr and get a copy of his book, "The Real Anthony Fauci", Waterstones will order it.

It may, or may not, interest you to know that Remdesivir, offered by our NHS to the "vaccinne hesitant", was deployed by Fauci as one of three vacinnes against Ebola, they were all pulled soon after because of the severe consequences, Remdesivir was the most mortal with, if memory serves, a mortality/recipient rate of 38%, Russian Roulette offers good odds?

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Replying to moneymanager:
By stepurhan
06th May 2022 09:44

So you want me to go to a site run by Robert Kennedy Jr and buy a book by the same to learn about health matters.

Curious as to how he became an expert in health matters. At Harvard he studied American History and Literature. At the University of Virginia he studied law. Neither of those would seem to give someone the background knowledge to give informed advice about health matters.

So, in the interest of having a normal conversation, why do you trust him to give informed advice about health matters?

Also do you have a source for the Remdesevir figures you are quoting. Those are terrible odds, but I have no reason to just take your word they are accurate odds.

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Replying to Dr Fauci:
By moneymanager
06th May 2022 00:38

You can have a normal conversation with me, I've seen this for the BS that is it pretty much from the get go; I was aware of Schwab's "Young Global Leaders" boast with Putin's name included, I haven't been able to verify it but I have seen references to Putin having his Davos ticket cancelled, it wouldn't surprise me, the whole anti Russia narrative reminds me of that of another country whose leader tried to dissassociate from the global banking system, Germany, 1938 onwards. I think that we have actually moved beyond this being only, or even, about money per se, it's about power, absolute and final.

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By Self-Employed and Happy
04th May 2022 12:48

A better way to do this would be for Accountants to make a type of "BBL report" through the SARs reports for companies they suspect / suspected of claiming fraudulently.

It would point this "crack team" in the right direction, we all know this team will be fully of overpaid civil servants that don't know their [***] from their elbow and some MP / Lord will be getting a kickback.

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By Alan Daines
05th May 2022 12:34

Utter Drivel! This is all about passing the buck. Shortly before these schemes were announced the Government announced they were considering 'helicopter money' to keep the economy afloat. This readers may remember was all over the news. This was ultimately delivered in the form of Bounce Back Loans and Furlough scheme - AKA a method of distributing money into the economy to keep things moving.

Now that the economic chickens are coming home to roost, the Government is changing tack and looking for somewhere to place the blame for its failures. The furlough and BBL money is not tucked under peoples beds, it has all been spent - by keeping staff employed and putting food in the cupboards during the rediculous lockdown policy.

The money was handed out with a 'we don't care, nobody cares' policy. It is irrelevant now that a portion of it was distributed to fraudsters, many of whom were ordinary business people before covid, who were easily able to bend the truth to fit the criteria for the funding out of desparation to keep their businesses afloat. It is irrelevant because the distribution of these funds achieved the Governments stated objectives. It bought cars, paid mortgage payments, and was circulated into the economy at some point or other and continues to circulate - this is why we headed into the high inflation zone.

The Government having achieved what it set out to, has preserved it's own income from tax revenue - collecting a large part of the funds back in the form of VAT and duties each time this additional circulating supply of money is spent. This has kept the countries GDP etc over the Brexit period looking far better than it actually was/is. The problem the Government are facing is that this 'ruse' is unsustainable.

Oh I am quite sure they intended to be able to keep it up until after the next general election, with billions in lending on one side of the balance sheet apparently negating the borrowing on the other. The real problem is, if the BBLs and recovery loans default, this sham no longer holds up. It is for this reason the plan has now changed - justify the problem by blaming it on fraudsters, but also by bullying as many borrowers as possible to keep up the repayments with fear borne out of the threat of being accused by fraud and continue trading where they would otherwise have closed their businesses down for being insolvent.

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By Nick Belton
05th May 2022 12:43

There are loads of companies that got the £50K BBL that are now seeking / hoping to be struck off the Companies House Register. There are also business with perfectly healthy balance sheets before - and after - Covid who have trousered the £50K almost as an insurance policy. These include 2 accountancy practices where - as a practitioner myself - I've never been busier as during the lockdown period.

I had the feeling at the time that people would apply for the BBLs and somehow get away without paying it back, i.e. get the money, spend it, get an employed role then seek to bin off the personal service company. I heard of one chap even invest a chunk of his £50K in crypto-currency, others have paid off punitive credit card debt with BBL money. Yes, there were those who needed it to keep afloat and yes it has helped them, but it has also brought out the worst in others.

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By Forward-thinking
07th May 2022 11:58

The number of companies that were incorporated for the sole purpose of receiving bounce back loans beggars belief! Who were the clever people that decided this was a good idea???……

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