Make sure you know what you have to pay back
The bounce back loans were available to small and medium-sized businesses during the coronavirus pandemics and subsequent lockdowns.
These loans kept businesses open during the pandemic and over 800,000 were approved in the first six weeks of applications being open.
However, as these were loans, they do need to be paid back. Do not leave yourself open to HMRC investigation or potential prosecution for fraud.
Check your terms and conditions
Business owners who took the bounce back loan should remember that it is a loan and it came with specific terms and conditions.
You should check these carefully or speak to an accountant if you’re not sure of anything in your terms and conditions.
The basics are:
- You can only have one loan per ‘group’. If you applied for a loan for each business under common ownership, then this will be classed as fraudulent.
- You should not have applied for a bounce back loan if you had 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 using the bounce back loan to refinance these in full.
- The loan is not for personal use. It can be used for a variety of purposes such as investment or working capital. It must support commercial activity in the UK.
- If your business is in default under the terms of another borrowing facility then it will be deemed to be in default of the bounce back loan.
- You must check the full terms and conditions of your loan if you need further funding during the term of your bounce back loan. It is often not allowed to take on any form of security, mortgage, pledge, lien or encumbrance over assets.
Be warned that banks are undertaking checks and monitoring of transactions, so if they find anything suspicious or fraudulent, you can and will be charged and prosecuted. If in doubt, please speak to us.
Company money or personal?
Some business directors and owners have a hard time remembering what is and isn’t company money, and that the business account should not be used as an extension of their personal accounts. There have been plenty of instances of these loans being used for personal car purchases, property and holidays. This is not what the loan is to be used for, and the banks will be able to track it.
There are some businesses that believe the government will simply not chase for the loan to be repaid. This is wishful thinking as they are already contacting those who they think have misused the loan.
Your moneylender, accountant or bookkeeper all have a legal obligation to report any suspicions of fraudulent activity related to the bounce back loan to the National Crime Agency.
Who can I talk to?
You can always speak to us here at d&k Accounting, if you’re unsure of anything in relation to the bounce back loan.