CBILS loan fraud could cost £130m

More than £130m was given to zombie companies or companies with no track record under the coronavirus business interruption loan scheme (CBILS), a new investigation has found.

According to a review by Bloomberg News, a number of companies have claimed emergency funding despite not trading for years. Other companies claimed millions of pounds in government-backed loans just days after the company was founded.

One emergency loan, for £4.7m, went to a firm founded just two days before it received the funds, corporate records show. Another £1m loan went to a company that was dormant before the pandemic’s onset and then went into voluntary liquidation less than a year later, Bloomberg found.

Read more: P2P lenders drop off the Deloitte UK Fast 50

At least 60 dormant companies were approved for CBILS funds, the review found. More than 85 companies had only been in existence for weeks, or at most a few months, before receiving loans under CBILS.

The review covered approximately 45 per cent of total CBILS borrowers – more then 49,000 companies. The Copenhagen Business School assisted Bloomberg by providing an initial dataset.

Read more: The Innovative Finance ISAs you can invest in with as little as £1

Lenders were authorised to loan up to £5m to small businesses under the terms of CBILS, with the government guaranteeing 80 per cent of the funds. More than £26bn was loaned through CBILS in total.

The Department for Business, Energy & Industrial Strategy said that it is “continuing to crackdown on Covid-19 fraud and will not tolerate those that seek to defraud the British taxpayer.”

“We are working closely with lenders and enforcement authorities to detect and investigate fraud,” said a spokesperson for the Department for Business, Energy & Industrial Strategy.

Read more: SME confidence returns ahead of festive season