Used Bounce Back Loan (BBL) for private expenses?

Introduction & Background(Bounce Back Loan)

During the COVID-19 pandemic, all UK SMEs could apply for Bounce Back Loan (BBL). BBLs could be used for any purpose that would benefit the business. As different sectors were having different issues at the time.

Some used the BBL to increase working capital, modify business operations to continue trade, or refinance company debt. These are all legal uses of the BBL because Utilizing them benefits the company and improves its financial position.

BBLs could also be used to pay staff, including directors, and dividends. But rules against taking unlawful dividends and ensuring sufficient profits still applied.

Did you take BBL and is in a mess to repay it back?

You don’t need to worry about it because there are many businesses going through this tough time. Some of them have even exhausted the Pay as you grow scheme of the government and payment holidays as well. There is one important point to consider here is that if you have used the funds wholly. Exclusively, and necessarily for business then you don’t need to worry about it. A normal liquidation would be enough in this case.

What is the meaning of fraudulently using the BBL?

  1. Bounce Back Loan misuse occurs when you use the funds for personal purchases or transfer them to your personal account. Without taking a salary or dividend (certain limits apply) from the business.
  2. A director may have given false representation regarding sales/turnover of the company e.g Dormant company took a loan of £50k by falsely showing the sales of £200k. Even if the funds were used for business, this is BBL fraud.

If you obtained this loan fraudulently?

If your company can keep paying its Bounce Back Loan, you won’t have to say what you spent it on. Investigations into loan use begin after a company closes or you stopped making payments.

If your company goes for strike-off (closure) with an outstanding balance of BBL, your funds will be investigated. If Bounce Back Loan funds were used for personal rather than business purposes, you could be held personally liable for fraud.

Taxsteins Ltd’s Findings

Fraudulently obtaining or misusing BBL funds could lead to your company’s liquidation if it can’t repay the loan. Misusing Bounce Back Loan funds could be considered fraud, and you could be held personally liable for the loan’s balance. Director disqualification and a heavy fine may result from an Insolvency Service investigation.

No doubt, people have used this loan facility for fraudulent purposes, but:

1. the government has remained negligent in this case because there was no supporting evidence requested from the applicant at the time of making this loan application. Ideally, the government should have asked for some details to know the legitimacy of the business e.g Banks should have been given permission to check the status of the company and the level of turnover from HMRC either through a portal or web-check.

2. There are millions of businesses that applied for £50k of loans even though their status was dormant. Banks should have asked for further evidence to support £200k turnover. The major identifier was VAT number because companies must register for VAT if their turnover crosses £85k (unless selling some exempt items). Nothing was asked at the time of application and now banks are spending hundreds of millions of pounds on recovery that will resultantly recovery from the government along with BBLs.

3. Many company directors used the BBLs for personal property purchases. You must have noticed how people were managing to buy properties when the whole world is on the verge of a disaster, but no one bothered. Why didn’t banks apply some sensibility checks? I am not saying all were buying the stuff fraudulently but there were plenty of people who did this.


The government and the banks joined their hands together to support the economy (with some negligence apply) during the pandemic, but many (not all) businessmen used this support for personal benefits. They exhausted all sources of support (Furlough, Council Support, BBLs, Business recovery loans etc) and now they are trying to close the businesses. According to our research, banks will resultantly revert to the government in case of default from the businesses and then the government may introduce some new rules to tackle this unfortunate situation. As far as businessmen used the BBL wholly, exclusively and necessarily for business then they don’t need to worry about they should opt for voluntary liquidation.