Strike-offs from Companies House increased to 39,601 in the first three months of 2021 compared to just 4,695 in the same period in 2020.

The staggering jump backs up fears of a wave of CBILS and BBLS loan fraud. The government is proposing to enhance the powers granted to the Insolvency Service to enable it to investigate and disqualify the Directors of dissolved companies.

Many businesses have closed their doors due to the pandemic, however it is thought many companies are shutting down purely to avoid CBILS and BBLS repayments.

The pressures of the pandemic, combined with the speed of the CBILS and BBLS rollout meant that many of the standard underwriting checks were not carried out before lenders wrote these loans.

BBLS, which provided up to £50,000 in loans to assist the smallest businesses through lockdown, are thought to have been the most open to abuse.

80% of BBL applications were granted, with the majority going to micro businesses.

While the Government has ultimately pledged to guarantee almost all of the value of pandemic-related loans (80% in the case of CBILS and 100% for BBLS), lenders are likely to have to exhaust their recovery options before turning to the Treasury for compensation on defaulted loans.

Some lenders who suspect strike-offs have occurred to avoid CBILS and BBLS repayment can apply to have these companies reinstated by Companies House in order to pursue debt recovery. Where loans were backed by personal guarantees by the company’s directors, lenders will be able to pursue these individuals directly.

We advise a number of lenders on issues such as these so please get in touch if this is something we can help you with.

“With the government unlikely to pay out to lenders who cannot prove they have actively pursued all the available debt recovery options, banks are now gearing up to identify the potentially thousands of loans on their books likely to default,” Pallott told City A.M. today.