Consequences of improperly obtaining bounce loans

West Midlands traffic commissioner Nick Denton recently conducted a public inquiry into Mafuwer Logistics Ltd. The company obtained a standard international license for three vehicles in December 2020.

The traffic commissioner found that almost all of the company’s financial resources were provided by a £ 50,000 rebound loan (BBL) in May 2020. However, the company’s turnover was much lower the £ 200,000 needed to qualify for such a loan – the maximum allowed. BBL representing 25% of turnover or £ 50,000, whichever is less.

Mr Denton also found that the company’s bank statements, provided as proof of its financial condition, contained an unusually large number of items that appeared to constitute personal use of funds by the manager.

The company also had a very poor maintenance record and numerous tachograph violations. The commissioner concluded that the company did not have a good reputation or financial condition and therefore revoked its license.

Commenting on the case, Mr Denton said: “This is not the first instance I have come across where a bounce loan appears to have been improperly secured. I know that at the height of the pandemic, banks did not ‘did not always have the opportunity to verify if applicants were qualified for the level of loan requested. However, if I see that companies or individuals lied about their turnover when applying for the title loans I will draw conclusions unfavorable on good repute.

“I also caution against the tendency that I have seen in some companies to fund personal expenses from company accounts. There are only three ways that directors can withdraw money from the company: salary, dividends, or a duly documented director loan (which must be repaid). They can’t just use the company’s debit card to fund personal purchases, vacations, etc. It is tax evasion and it will damage the good reputation.

Further details can be found here.

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