Rogue business owners use coronavirus loans to buy property and supercars

Fraudulent use of the Government’s coronavirus Bounce Back loans will be prosecuted, the Treasury has warned after it emerged some business owners are using the money to buy houses and supercars. 

The scheme is designed to help businesses that are struggling because of the pandemic, by giving them access to loans of up to £50,000 that are interest-free for the first 12 months.

However, it has emerged that a minority are abusing the scheme.

Saba Amari, of supercar dealership Amari said one customer tried to put a deposit on a new Lamborghini SVJ worth more than £250,000 using money from a Bounce Back loan.

The number of requests from buyers trying to purchase using the loans was in the double digits and rising, said Mrs Amari, with most demand for the “cheaper Porsches, at about £100,000”.

To take out a Bounce Back loan, the borrower must confirm to the lender that the funds will only be used to provide economic benefit to the business and not personal gain. However, the terms of the loan can be tricky to police.

Chris Sykes of mortgage broker Private Finance said he has had requests from landlords trying to purchase buy-to-let properties using a Bounce Back loan as the entire deposit, as well as people trying to buy their own first home. “Now they have a large inflow of cash, they want to use it to get on the ladder,” he said.

A Treasury spokesman said: “We’ve been clear that the loans must be repaid and banks are undertaking appropriate precautions against fraud, including customer checks and the monitoring of transactions. Any fraudulent applications can be criminally prosecuted.

“The Government expects everyone to act responsibly and in the spirit of the package, and only claim and use support as intended.”

Some business owners have taken out the loans because they are cheap and readily available, rather than because they need them, Mrs Amari said. “My concern is that I don’t think these loans have been vetted properly and the taxpayer will be picking up the bill. In the long run is it not just weakening our economy?”

Amari has not accepted requests from clients wishing to buy with the loans.

Nick Morrey of John Charcol mortgage brokers said that lenders did not want to offer mortgages to buyers using the loans, as it suggested they were in financial difficulty. However, buyers could use their own savings for the deposit and then replenish their bank account with the loan.

“This is a problem which is starting, and I suspect it will grow,” said Mr Morrey.

In May, Paul Smith, who has a property portfolio and runs Touchstone Education, which provides investment training courses, posted a video on his YouTube channel advising his 12,000 followers to take out the loans. “There is no caveat or limits with what you can do with that,” he said. 

A spokesman for the British Business Bank (BBB) said it was closely monitoring the situation. It has set up a fraud prevention working group that is co-hosted weekly by UK Finance, the lending body, and Cifas, the fraud prevention service. Members include lenders accredited by the BBB. 

“Of course we are concerned that a small number of borrowers may be allegedly using the Bounce Back Loan scheme to personal purposes rather than for business purposes,” the BBB spokesman said.

Businesses are only eligible for the loans if they have been adversely impacted by Covid-19 and the borrower is responsible for repaying the loan, including interest at 2.5pc after the first year. Anyone providing inaccurate information or attempting to gain financial advantage dishonestly “will be liable to criminal prosecution for fraud”, they added. 

The Bounce Back loan scheme has helped more than 800,000 small firms stay afloat. 

Source Article