The bounce back loan (BBL) system is capable of being abused and in many cases action will be taken against Director’s even if they acted with good intentions.
Examples of Situations we have seen are
1. taken BBL and used £26k to buy a private plate and start the lease on a new Bentley for purely personal use. The other £26k went to help the business. The BBL interest is at 2.5% pa when you start to pay it but the lease will be at a much higher rate for what is non essential for the business.
2. £20k BBL paid straight out to the director as a loan to fund lifestyle. If the company did need the money that it now cant access, the director will need to pay it back. If they havent got it, the company may fail and a liquidator will pursue them for the £20k that could lead to their bankruptcy
3. very small one person company doing personal training turning over £30k a year at best. Forecast that to go to £200k to get a £50k BBL to fund a small gym from leased premises where they have personally guaranteed the lease. Due to size its still in lockdown and revenue is on the floor but all the money has gone on used kit and changes to the landlords property with the next rent payment due at the end of this month. If that cant be paid and numbers don’t increase very quickly, there is a good chance this business will fail before it is even started. At that point the landlord will chase the director for the payment of the remainder of the lease.
As always, the mantra is ‘take advice’ as some actions may have personal consequences for directors
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