Fraud fears over Rishi loans: Emergency cash ‘used to buy Ferraris’  


Fraud fears over £31bn Rishi loans: Experts report some small business owners are using the ’emergency’ cash to buy Ferraris

Fears are mounting that the Bounce Back loan scheme designed to prop up struggling companies during the coronavirus crisis is being abused.

A minority of the 1m small-business owners who have borrowed so far, purportedly to help their firm survive the pandemic, are using the money to buy Ferraris, property or even premium bonds, according to experts.

The warning follows our report last month highlighting how dealers were reporting a rise in interest from entrepreneurs, with bounce back loans believed to be funding supercar purchases.

Dishing it up: Chancellor Rishi Sunak emergency loans have been taken up by over a million small business – but there is increasing concern over firms abusing the scheme

In less serious cases, several businesses are also using the cheap Government-backed loans to pay their existing debt, which carries a higher interest rate.

Though not illegal, the boss of one business group said this was surely against the ‘spirit of the scheme’.

The Bounce Back scheme was launched by the Treasury in May, to hand loans of up to £50,000 out to small businesses which were struggling to survive through the coronavirus lockdown.

So far more than 1m loans have been approved worth nearly £31billion. The Treasury will publish updated figures today.

The banks put in charge of lending the money were told to do only minimal checks on borrowers in order to speed up the process, and the Government vowed to bear 100 per cent of any losses which the bank suffered if a business failed to repay the loan.

Over a million approved

£50,000 –  Maximum size of Bounce Back loan 

100% –  Government guarantee

1,240,701 – Bounce Back loan applications

1,013,410 – Loans approved

£30.93bn – Value of loans approved

Fears are growing that the taxpayer could be left to foot an enormous bill.

Some ‘unscrupulous’ company directors are borrowing with little intention of paying the money back, insolvency experts have reported.

Steven Cooklin, the chief executive of insolvency litigation funder Manolete Partners, said: ‘I’ve heard of people buying fast cars, Ferraris. 

‘Directors are taking the money out of the company as a loan to themselves, and putting it into fixed assets making it difficult to be recovered.’

Ian Cass, managing director of the Forum of Private Business, said he too had heard of company directors using the money to buy expensive cars.

But he has even heard of directors using the loans to make investments in premium bonds, a savings product which enters the holder into a monthly prize draw.

‘A lot of people went for the Bounce Back loans when they didn’t need the money – they just wanted £50k sat in their account as a contingency,’ he said.

He said he had heard of several companies using the loans to pay off their more expensive debt, since the Bounce Back loans are interest-free for the first year and then carry a 2.5 per cent rate thereafter.

Fraud claims: Ian Cass, managing director of the Forum of Private Business, said he had heard of company directors using the money to buy expensive cars

Fraud claims: Ian Cass, managing director of the Forum of Private Business, said he had heard of company directors using the money to buy expensive cars

Although this might make financial sense for the individual companies, it could leave the Government with a heavy bill if they tumble into insolvency during the economic downturn.

‘I don’t think that’s in the spirit of the scheme,’ Cass said.

The same goes for landlords who are using the loans to put down deposits on properties, and expand their business empire, he added.

Several property advisers told trade publication Mortgage Solutions that they had been approached by landlords looking to use the loans to buy more buildings, rather than for the survival of their business.

Lee Manning, a partner at business advisory firm Resolve, said: ‘I’ve heard some people say: ‘Oh, my friend got one and they’re going to spend it because there’s no personal guarantee and they don’t think the Government will chase them for it’.’

He thinks that many directors believe they are free to use the loans as they wish, since the Government suspended liability for wrongful trading at the end of March in response to the pandemic.

But directors can still be held liable for other types of wrongdoing, such as misfeasance or transactions at an undervalue, he added.

At the more extreme end of the scale, two men were arrested in London on Friday over an alleged scam to claim Bounce Back loans.

Detectives obtained orders to freeze ten bank accounts containing a total of £553,305 after finding application forms for the loans.

Manning, however, said: ‘If you weigh up the pros and cons, Bounce Back loans will certainly have caused more good than damage.’



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