BOUNCE BACK LOANS
Bouncing back from the brink Richard Simms Managing director, FA Simms & Partners
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any small and medium-sized businesses have received a bounce back loan. Around 860,000 loans were approved in the first six weeks and these loans are essential for businesses affected by the Coronavirus pandemic. However, HM Treasury has warned that any misuse of the scheme could result in prosecution for fraud. It is important that a problem isn’t inadvertently created by not understanding the scope of the loan and what can and can’t be done with this money.
Bounce back loan terms and conditions
The bounce back loan is a debt, not a grant, and consequently has terms and conditions attached from the lender, which should be checked very carefully. Common conditions include: ● There is only one application per “group”. If you have applied for more than one business that is under common ownership or control, then this is fraud. ● You must not have already received a loan under the Coronavirus Business Interruption Loan Scheme (CBILS), the Coronavirus Large Business Interruption Loan Scheme (CLBILS) or the Covid-19 Corporate Financing Facility (CCFF) unless you are refinancing it in full AIAWORLDWIDE.COM | ISSUE 113
© istockphoto/RichVintage
Richard Simms asks whether the strict range of terms and conditions mean that bounce back loans amount to a bouncing bomb.
with the bounce back loan. You have until 4 November 2020 to arrange this with your lender. ● The bounce back loan is an alternative source of finance if you have been affected by the Coronavirus outbreak. It can be used for a wide range of purposes, such as working capital or investment, but it must support trading or commercial activity in the UK. It is not for personal use. ● If the business that takes out the loan is in default under the terms of any other borrowing facility, whether it is with the same lender or not, it will be deemed to be in default of the bounce back loan. ● Be particularly careful if your business needs any other source of funding during the life of the bounce back loan taking any form of security, mortgage, charge, pledge, lien or encumbrance over its assets whatsoever. You must check this is allowed in the loan terms and conditions, as often it is not.
Bounce back loans and fraud
As a spokesman for HM Treasury stated: “Our bounce back loan schemes are designed to keep businesses running during this difficult time… We’ve been clear that the loans must be repaid and banks are undertaking appropriate precautions against fraud,
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