Growing numbers of small business owners are using Bounce Back Loans designed to keep companies afloat to buy themselves luxury supercars instead.
Car Dealer Magazine has spoken to a range of leading supercar dealers across the UK and found that business has boomed since the government began handing out cash to company owners.
Small firms can borrow up to £50,000 per company under the Bounce Back Loan Scheme (BBLS) with the debt 100 per cent backed by the government, no repayments for a year and 2.5 per cent interest after that.
That makes it cheaper than car finance and business owners are seemingly using the cash to boost the deposits for new supercars, costing as much as £300,000, instead of putting the money into their firms.
Recent figures showed the government has so far handed out around £24bn in funding to nearly 800,000 small companies under the BBLS. There are no restrictions on what company directors can do with the cash once it is in their businesses.
Tom Hartley, director of Tom Hartley Cars, told Car Dealer Magazine that there’s a definite trend in small company owners splashing out and has heard similar stories from across the motor trade.
Saba Amari, of Amari Supercars said they had seen an increasing number of company directors using the Bounce Back Loans to fund new supercar purchases.
‘We absolutely have had customers who say they are using the Bounce Back Loan money to boost their deposits for supercar purchases but we have always advised them responsibly and suggested this is not the right thing to do with a government-backed loan,’ she told Car Dealer Magazine.
‘These Bounce Back Loans were not for this purpose and while it is up to the company directors what they do with their money we suggest they probably shouldn’t be spending this money that way.’
Andrew North, director of Alexanders Prestige, confirmed he’d sold cars to clients who had used Bounce Back Loan cash to fund part of the deals and said he believed some businessmen had even used dormant companies to raise cash at low rates to splash out.
He said: ‘We have had a few clients using spare cash from bounce back, although the ones I’ve spoken to have been clients that have larger businesses, but in their words have the odd “sleeper” companies that don’t trade much outside of their groups and have basically played the system.
‘A bit crazy isn’t it? But I guess any extra liquidity in the market at this current time is a good thing no matter where it comes from.’
Another leading supercar dealer, who didn’t want to be named, confirmed to Car Dealer they had seen a ‘definite spike’ in sales to small company owners too.
‘Three customers in a row told me they were using the Bounce Back Loans to put down deposits on the cars they’ve been wanting for years,’ said the luxury car dealer.
‘One said he would never have bought the car if it hadn’t been for the Bounce Back Loan scheme. That £50,000 is a healthy deposit and at the rate the government is offering the money is very cheap.’
An HM Treasury Spokesperson said: ‘Our Bounce Back Loan Scheme is designed to keep businesses running during this difficult time and have so far helped more than 800,000 small firms.
‘We’ve been clear that the loans must be repaid and banks are undertaking appropriate precautions against fraud, including customer checks and the monitoring of transactions. Any fraudulent applications can be criminally prosecuted.’
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