Bounce Back Loan - What monitoring do the banks carry out?

Billy8421

I'm curious. If you've been accepted for a bounce back loan to help your business, how do the banks check what those funds were used for? ie, if I intend to upgrade my company website (sorely needs doing) would the bank require evidence of this? I've seen articles of people running out to buy second hand Porsches with the money!! Will the banks review that and take action? Or only if the business folds? Surely people using the money unethically wont get away with it?

Percy1983

I can't imagine they will be asking everyone for evidence but could do if they had any reason to suspect or as you say if the business folds.

mattyprice4004

Unethical does not equal illegal - it's their money to use as they wish, as long as they pay it back who is it really affecting? 

jfinnie

I think it probably is illegal - Fraud Act 2006.  You have to make undertaking to the BBB when taking out the loan on the use of the loan funds.  

Jeremy535897

Upgrading the company website is a legitimate use of BBL funds. Paying salaries and benefits to employees (including the provision of second hand Porsches) is too. The issue is whether the loan is used for the economic benefit of the business, rather than for personal purposes, so a sole trader buying a second hand Porsche with the funds might have more difficulty justifying the declaration they made to this effect.

jadex

Jeremy535897 said:

Upgrading the company website is a legitimate use of BBL funds. Paying salaries and benefits to employees (including the provision of second hand Porsches) is too. The issue is whether the loan is used for the economic benefit of the business, rather than for personal purposes, so a sole trader buying a second hand Porsche with the funds might have more difficulty justifying the declaration they made to this effect.

but as business = sole trader and sole trader = business then paying sole trader's (AKA business) 30-40% personal (which is at the same time business one)  credit card with 2.5% BBL makes business sense as leaves sole trader (AKA business) with more money to expand/increase/improve/develop or just keep alive the business, therefore it is for economic benefit of the business;

Jeremy535897

Refinancing is allowed, depending on whether the borrowing still on the card was business or personal. I don't think a lot of investigation will be done, unless perhaps there is a default.

Sibbers123

mattyprice4004 said:

Unethical does not equal illegal - it's their money to use as they wish, as long as they pay it back who is it really affecting? 

This is factually incorrect. There are a number of things the money can’t be used for, especially if the BBL is in a limited company’s name.

mobilejo

jfinnie said:

I think it probably is illegal - Fraud Act 2006.  You have to make undertaking to the BBB when taking out the loan on the use of the loan funds.  

Fraud requires dishonesty at the outset - e.g. lying on the application form.

Taking the loan with the intention of using it for a business purpose, or without knowing what it will be used for but holding as a safety net, is perfectly legitimate. If at a later point, the person uses the loan for something that is against the terms, then it is merely a breach of the loan agreement and there is no fraud.

jfinnie

mobilejo said:

jfinnie said:

I think it probably is illegal - Fraud Act 2006.  You have to make undertaking to the BBB when taking out the loan on the use of the loan funds.  

Fraud requires dishonesty at the outset - e.g. lying on the application form.

Taking the loan with the intention of using it for a business purpose, or without knowing what it will be used for but holding as a safety net, is perfectly legitimate. If at a later point, the person uses the loan for something that is against the terms, then it is merely a breach of the loan agreement and there is no fraud.

The particular example given - and to what I was replying - was the notion that taking out a loan and immediately going to buy a Porsche would be merely unethical, which is a bit different to the scenario you are putting forward.  I'm sure the timing would factor strongly into any prosecution for such matters.

And even if such were accepted for not being fraud (eg due to the passage of time - I was going to use it for the business but a year passed, I didn't need it, so bought myself a Porsche as a COVID-pick-me-up) it is STILL against the terms and conditions signed with BBB.  They don't discuss intention, they are specific as to what you can and can't use it for.

For the avoidance of doubt this is what was in the agreement I saw:

"I/We undertake to use the credit granted on the basis of this agreement only to provide economic benefit to my/our business, for example, providing working capital, or investing in my/our business. I/We also confirm that the Bounce Back Loan will be used wholly for business purposes and not personal purposes."

This is not an agreement setting out the position at a point in time that could change in the future, it is an undertaking that is binding on the duration of the agreement.