Bounce Back loan fraud of £1bn detected…
The British Business Bank has reported to the Public Accounts Committee (PAC) that twenty lenders have rejected 26,933 fraudulent applications for bounce back loans between May and October 2020.
The scheme has loaned 1.3 million loans worth £40.2bn so far, and will remain open for applications until 31st January 2021.
The National Audit Office (NAO) has already warned that up to 60% of customers may fail to repay the loans because there were minimal checks in place and many fraudulent applications were not detected before being paid out.
In October, the National Crime Agency reported that the scheme was being exploited by organised criminals.
The consensus is that there will be a large hit to the taxpayer, given the government’s underwriting of the scheme. This could result in a potential cost to government of £15 billion to £26 billion.
A Covid Fraud helpline has been set up to catch offenders, through which the public can report suspected illegal activities.
Arrests have already been made where fraud has been identified after loans have been paid out, and more should be expected.
Whilst many accredited lenders have restricted applications to existing customers, this has left up to 250,000 small businesses unable to access the scheme because they do not bank with an accredited lender. Those lenders who accepted applications from new customers found themselves overwhelmed with new account applications.
As part of the most recent round of updates to support, the deadline for applications for both Bounce Back Loans and CBILS loans were extended to 31st January 2021, as mentioned above. Where businesses hadn’t applied for the maximum they would be allowed to under the Bounce Back loan scheme previously, they are also now allowed to apply for additional funds up to that limit. This remains a maximum of £50,000 or 25% of turnover.
If we can help you with business funding concerns, please do get in touch. Careful cash flow monitoring is vital to ensure that repayments can be made when they fall due, particularly if the borrowing was not part of your original business plan. You can find more information about cash flow in our ‘Rebound Resources‘.