There have been a growing number of reports by mortgage advisers over the misuse
of Bounce Back Loans that have been claimed by people including existing
landlords. Attempts have been made to use these loans towards the deposit of
purchasing buy-to-let property.
The Bounce Back Loan Scheme (BBLS) is a government scheme solely aimed for
small businesses and self-employed people that have been adversely impacted by the
coronavirus. These loans can be between £2000 up to a maximum of £50,000. No
interest is payable for the first 12 months, after which interest will be payable at 2.5%
fixed per annum; the interest rate being set by the government. The loan may be
repaid back at any time without penalty.
It was announced on 23rd June 2020 by the government, reported by British Business
Bank, that 921,229 Bounce Back Loan Schemes have been approved, amounting to a
total figure of £28.09 billion. The British Business Bank is the UK’s government
economic development bank founded in November 2014.
Lenders already look down upon any form of loan being used as a deposit for
purchasing buy-to-let property. It is therefore not surprising that lenders such as
Precise, Interbay and Kent Reliance have announced that Bounce Back Loans are
also viewed as an unacceptable source of deposit, particularly when they are only
intended for businesses that are struggling with cashflow due to the impact of the
There has been a rapidly rising number of landlords in the past couple of years who
have set up Limited Company Special Purpose Vehicles (SPVs) through which buy-
to-let property is purchased, held and rented out. Some landlords have been able to
apply for the Bounce Back Loan scheme through there.
Newspaper investigations from The Sunday Times, have also been conducted against
Paul Smith, a self-claimed Millionaire Property Investor who posted a Youtube video
advising and encouraging the public to take out Bounce Back Loans to buy property,
even if you aren’t struggling. He went so far as to mention that “you do not have to
pay back the Government bounce back loans.”
The idea of Bounce Back Loans or other government loans that have arisen as a
result of Covid-19 being described as “cheap loans” or “free money” is misleading and
deceptive, particularly when it is put in the context of using it for personal gain.
Vanessa Warwick, Co-Found of Property Tribes, a leading and reputable buy-to-let
forum for landlords, commented to suggest that the video was “ill-advised and
disgraceful” and his comments were “extremely damaging for the public image of
It is very important to be wary and diligent about information that is consumed on
the internet, especially by those openly giving advice without any qualifications about
your finances or knowing your personal circumstances. In an unregulated area such
as Youtube, caution must be met and it is not recommended any action is taken
solely from there, as doing so can likely result in damaging consequences to you and
your personal finances.
Melissa Lawford, a journalist for The Telegraph confirms that a fraud prevention
team has been set up by UK Finance, and is closely monitoring those such as Paul
Smith and other people who may be abusing the government scheme (such as by
providing inaccurate information to make claims for the loan).
It is fair to say that trying to police whether people are using the Bounce Back Loan
for its intended purpose is hard. No real restrictions or enforcement has been put
into place by the government to state how it should be spent. In the case of buy-to-let
it can be slightly overlooked when some Limited Company buy-to-let lenders do not
always ask for proof if the deposit was coming via a Director’s Loan. However we can
expect that most lenders, if not, all buy-to-let lenders will not be accepting Bounce
Back Loans as a source of deposit.
A spokesman from the Treasury re-iterates that “the Government expects everyone
to act responsibly and in the spirit of the package, and only claim and use support as