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Bounce Back Loans Of £50,000 Required Turnover Of £200,000

Consequences Of Improperly Obtaining Bounce Back Loans

Loan fraud has been said to be amongst the reasons why an operator licence has been revoked when a company is deemed to have been involved in improperly obtaining a bounce back loan.

The Traffic Commissioner for the West Midlands, Nick Denton, recently held a public inquiry into Mafuwer Logistics Ltd (“the Company”). The Company was granted a standard international licence for three vehicles in December 2020.

The Traffic Commissioner found that almost all of the Company’s financial resources had been provided by a £50,000 Bounce Back Loan (BBL) in May 2020. However, the Company’s turnover was far below the £200,000 necessary to qualify for such a loan – the maximum permissible BBL being 25% of turnover or £50,000, whichever is the lower.

The last filed statutory accounts for the Company for the Year Ended 31 July 2020 reveal at note 7 that it had bank borrowings of £50,000.

Mr Denton also saw that the Company’s bank statements, provided as evidence of financial standing, contained an unusually large number of items that seemed to constitute personal use of funds by the Director.

The Company is said to have had a poor maintenance record and numerous tachograph infringements. The commissioner concluded that the business did not have good repute or financial standing and therefore revoked its licence.

It seems that the Company’s Director decided not to answer questions concerning the Bounce Back Loan or use of the company funds to pay for personal expenditure. The barrister for the Director / the Company at a public enquiry held on 27 September 2021 explained that Harun Omar would not be answering any questions as he did not wish to incriminate himself in case of future proceedings.

However, a review of the Company’s bank statements by the Traffic Commissioner (“TC”) noted that the Bounce Back Loan was received on 19 May 2020 had reduced. It was the TC’s finding that the Director:

failed to distinguish between personal and company expenditure and has in effect used the BBL (which his company was not entitled to by reason of an insufficient turnover) to fund his own lifestyle. The improper obtaining of a loan by certifying that turnover was at least £200,000 when this was simply not the case is not reputable conduct.

Traffic Commissioner Comment After Company Improperly Obtaining Bounce Back Loan

Commenting on the case, Mr Denton said:

this is not the first case I have come across where a Bounce Back Loan appears to have been improperly obtained. I know that at the height of the pandemic banks did not always have the opportunity to check whether applicants qualified for the level of loan applied for. Nevertheless, if I find that companies or individuals have been untruthful about their turnover when applying for a loan, I will draw adverse conclusions about good repute.

I also warn against the tendency I have seen in some companies to fund personal expenditure from the Company’s accounts. Directors may withdraw money from the company in only three ways: salary, dividends or a properly documented Director’s Loan (which must be repaid). They can’t just use the Company debit card to fund personal shopping, holidays etc. This is tax evasion and will harm good repute.

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Disclaimer: Improperly Obtaining Bounce Back Loan

This page: Improperly Obtaining Bounce Back Loan is not legal advice and should not be relied upon as such. This article Improperly Obtaining Bounce Back Loan is provided for information purposes only. You can contact us on the specific facts of your case to obtain relevant advice via a Free Initial Consultation.

This page contains public sector information licensed under the Open Government Licence v3.0.

Elliot Green

Licensed Insolvency Practitioner & Chartered Accountant. We Know Insolvency Inside Out.

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