In the spring of 2020, the UK government’s Bounce Back Loan Scheme (BBLS) felt like the ultimate “Pass Go” in a high-stakes game of Monopoly. With a simple self-declaration and a 100% government guarantee, billions were funnelled into the economy within days. For many directors, the ease of access blurred the lines between a lifeline and “free money.” However, six years later, for many the game has changed . What once felt like a lucky roll of the dice has become a “Chance” card with a very specific instruction: Go directly to Jail. Do not pass Go. Do not collect £200.
At BRI Business Recovery and Insolvency, we’re here to breakdown the reality of covid loans and provide advice on what your business should do now if you find yourself in this position.
The Crackdown on Covid Loans: Six Lessons in Misconduct
Recent reports from Credit-Connect highlight a wave of criminal sentences and bans for directors who treated the Covid BBLS as a personal piggy bank. These cases serve as a sobering reminder that the “quick and easy” nature of the application did not mean a lack of accountability.
- The Double Dipper: A director was sentenced after applying for two £50,000 loans within five days, blatantly ignoring the one-loan-per-business rule.
- The Fictitious Empire: A director claimed £200,000 across three dormant companies and a fourth with inflated turnover. He was jailed after it was found he was entitled to just £16,000.
- The Personal Spender: A director claimed £50,000 despite his business not trading. He used the funds to pay personal debts and was handed a 16-month prison sentence.
- The Turnover Inflator: A director claimed his turnover was £200,000 to bag the maximum £50,000 loan, when the reality was closer to £33,000. He received a two-year sentence.
- The Dissolution Dodger: Two directors withdrew £30,000 immediately for personal use and then attempted to dissolve the company without informing the bank. The directors were sentenced to 14 months (suspended).
- The Forger: A director received the maximum 15-year disqualification after falsifying bank statements to show a multi-million-pound balance to secure government-backed funding.
These reality checks enforce the high stakes that any businesses simply appreciate when applying for covid loans.
The Role of the Insolvency Practitioner in Cases Related to Covid Loans
Many directors believed that by liquidating or dissolving their companies, the debt—and the evidence—would vanish. They were wrong. If going straight to dissolution, Under the Rating (Coronavirus) and Directors Disqualification Act 2021, the Insolvency Service can now investigate dissolved companies.
When a company enters liquidation, the Insolvency Practitioner (IP) has a statutory duty to investigate the director’s conduct. Regarding Covid BBLS, the IP must report to the Insolvency Service:
- Whether the turnover was accurately represented on the application.
- Whether the funds were used for the “economic benefit of the business” (and not personal luxury or debt).
- Whether the company was actually trading as of 1 March 2020.
- If multiple loans were taken for a single entity.
A Reminder of the Criteria of Covid Loans
In order to “play by the rules” when applying for a Covid Loan, directors had to meet specific criteria in 2020:
- Establishment: The business must have been UK-based and established before 1 March 2020.
- Adverse Impact: It must have been negatively affected by the pandemic.
- Loan Amount: Directors could borrow between £2,000 and 25% of their 2019 calendar year turnover (capped at £50,000).
- Exclusivity: Only one loan per business (or group, in some cases) was permitted.
As the Insolvency Service ramps up its pursuit of fraud, it is clear that the game is over. For those who broke the rules, the 2020 “Pass Go” moment has officially ended in a “Go to Jail” reality. And there are no “Get Out Of Jail Free” cards when it comes to Covid Loan misconduct.
How BRI Can Help with Covid Loans and Insolvency
If you or one of your clients have an outstanding BBLS and are considering closing a business via liquidation or dissolution, please pick up the phone and speak to us at BRI for a free consultation.
When it comes to any form of financial concerns, the earlier you seek advice the better. We are qualified insolvency practitioners with years of experience in company closures with outstanding debts. We can assist you in assessing the position of the business and give guidance as to the potential issues that may be encountered. We help you plan your next steps with eyes wide open rather than blindly collecting a ‘chance’ card with unknown consequences.
Don’t get flustered and flip the board over. Contact our team today to conclude your game with decorum.