YouTube is littered with videos by property gurus discussing with varying levels of expertise and probity how to apply for business Bounce Back loans and – in some but not all cases – implying indirectly that that they are a cheap way to raise finance to buy property.
Some are from controversial characters such as Paul Smith and Samuel Leeds who blatantly push the loans as potential funding sources, but also other ‘millionaire property gurus’ such as Glen Armstrong, who takes a more cautious approach.
But Ranjan Bhattacharya who has also published several videos about the loans, says he is highly critical of other mentors who advocate using the Bounce Back loans as an opportunity obtain investment funds.
But as we reported recently, one of the most controversial figures – Paul Smith – was investigated by a national newspaper over his suggestion that investors should use Bounce Back (BB) loans to buy property.
This kind of advice can be given by gurus freely and legitimately because HM Treasury’s guidance is extremely vague about what these loans can be used for, saying only that they are to help businesses ‘keep operating’ or ‘stay afloat’ during the crisis.
But would this include using a BB loan to put down a deposit on a mortgage property?
Glenn Armstrong of Property Millionaire Academy, who has posted several videos discussing the loans with property sourcing guru Christoz Wild, is one of the more cautious advice givers, but nevertheless suggests the loans can be used in some circumstances to buy property.
He tells LandlordZONE that the loans “can be used for development projects if you lend it to another company, but not as a deposit for buying investment properties.
“And most investment properties would not be profitable if you had to pay [the Bounce Bank loan] interest from rent income. Most lenders will not lend if they know deposit is from a BB loan.”
Wild says government guidelines state that BB loans must be used ‘for the economic benefit of the business’ so an example given is that the company receiving the loan could lend it to another company for a higher rate of interest.
“The new company would then be able to use the funds as it wishes within the property sector, subject to any restrictions that the original company gives in the loan agreement,” he says.
Cyril Thomas, who heads up the Property Investors Bureau, has told LandlordZONE that: “We would not encourage investors or individuals to do anything in breach of the terms of their loan – I don’t want to get into the moral maze of what these loans should or shouldn’t be used for, but to keep it factual.
*This article was amended on 16th July to correct an assertion that Ranjan Bhattacharya supported using Bounce Back loans to help finance investments, and highlight his opposition to the practice.