At the beginning of May, EYE contributor and head of PropertyTribes.com, Vanessa Warwick, posted a commentary on a YouTube video by self-made millionaire, Paul Smith of Touchstone Education.
Smith appeared to advocate using government Covid crisis bounceback loans to create wealth.
Smith went on to question whether the loans would ever have to be repaid.
A clearly incenced Warwick wrote:
Throughout this crisis, I said we would see the best and the worst in people, and sadly I was right.
In this disgraceful and ill-advised video, Paul Smith of Touchstone Education suggests that its “okay” to structure your property business so that you do not have to pay back the Government “bounce back” loans.
He says that the Government has taken your freedom away from you, so you should stick it to them – literally.
If you take his advice, you will “stick” it to yourself and the rest of the economy, including the tax payer.
Being vocal on social media to advocate taking loans with no intention of paying them back, is wrong on so many levels.
And anyone who thinks they can publish this kind of nonsense on the social web, without any kind of backlash is delusional.
It’s also extremely damaging for the public image of property investors.
The anticipated backlash hit the headlines yesterday in The Sunday Times.
Under the headline ‘YouTube Guru: ‘Use Covid loans to snap up a property’ , with a sub-heading saying ‘Paul Smith advised people to apply for a £50,000 handout – one they might not pay back’, Katherine Denham reported the story, highlighting Smith’s words on the video:
“I’m going to use that money to make money; if someone offers me free money, I’m going to take it.”
Vanessa Warwick was also quoted and the spat between her and Smith likened to the Netflix TV show ‘Tiger King’.
Smith put out a Youtube video that addresses his ‘neghead’ critics, including Vanessa Warwick at about 8 minutes in.
The Touchstone Education website says:
Paul Smith is the founder of Touchstone Education. A self-made property multi-millionaire, Paul was one of the first property investors in the UK to recognise the opportunities Serviced Accommodation offered to savvy property investors prepared to learn how to do this.
As well as owning and operating a sizeable SA portfolio, he has been a respected advocate, speaker and property educator on the subject for more than a decade and is a #1 bestselling author on Amazon for his book on Serviced Accommodation.
With a friendly and easy to understand delivery style – no matter the level of his audience – Paul’s passion for Serviced Accommodation is only too clear to see and hear.
“No other course can get you up and running a successful – and scalable – SA business in such a short time. In just 8 weeks you can be bringing in enough cashflow to create a springboard to real, transgenerational property wealth!”
So let me get this right, you can side with Vanessa, and agree that these loans were there to help pull the country through a global pandemic that has killed hundreds of thousands, hopefully only a once in a generation occurrence.
or you can side with Paul Smith who appears to have the business ethics of Mike Ashley spliced with Robert Maxwell, who has ostensibly misplaced his morality compass.
Seems an easy one this , game, set and match to Vanessa.
With a particular mention to the gobblededuke quote, as Baldrick would call it, where Paul cites ‘to create a springboard to real, transgenerational property wealth’
On a day when we’ve seen someone at the top of their linguistic skills with Ros retiring we’re witnessing here the double glazing, car boot salesmen pitch of Mr Smith.
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Thank you for your supportive comment Simon. It is appreciated. The “troll” video was somewhat unpleasant and made the whole issue “ad hominen”.
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A “spat” suggests a tit for tat argument – in reality, that never happened.
Ranjan Battacharya and myself responded to Paul Smith’s initial video as, in my case, I felt he was giving his followers poor advice and I felt it cast property investors in a negative light – to be seen to be profiting from a crisis where people were losing loved ones, their businesses, their livelihoods.
Since I wrote my initial response in May, the issues surrounding BBLs has become clearer. These are my extended thoughts on the use of them in property:
1. That BB Loans are ONLY for businesses “adversely affected by CV” which means businesses that are financially struggling. This is not money to use for other purposes other than cash flow, paying staff wages etc. and not for businesses that are not in financial distress to apply for, just because they can through self-certification.
2. That businesses have to have over 50% trading activity and that landlords running a “buy and hold” business would not qualify in the first place.
3. That BB loans cannot be used for deposits on fixed assets (investment property) or to buy fixed assets (property).
4. That taking a BB loan may impact your ability to get finance in the future due to the admittance of being “adversely affected by C19”. This is already proving to be the case as lenders are starting to include Covid19 in their under-writing protocols.
5. That taking a BB loan may impact your ability to get finance in future from an affordability point of view – a £50K loan having a repayment of circa £887.00 per month.
The Telegraph also published an article on Sunday on this topic. Excerpt:
In May, Paul Smith, who has a property portfolio and runs Touchstone Education, which provides investment training courses, posted a video on his YouTube channel advising his 12,000 followers to take out the loans. “There is no caveat or limits with what you can do with that,” he said.
A spokesman for the British Business Bank (BBB) said it was closely monitoring the situation. It has set up a fraud prevention working group that is co-hosted weekly by UK Finance, the lending body, and Cifas, the fraud prevention service. Members include lenders accredited by the BBB.
“Of course we are concerned that a small number of borrowers may be allegedly using the Bounce Back Loan scheme to personal purposes rather than for business purposes,” the BBB spokesman said.
Businesses are only eligible for the loans if they have been adversely impacted by Covid-19 and the borrower is responsible for repaying the loan, including interest at 2.5pc after the first year. Anyone providing inaccurate information or attempting to gain financial advantage dishonestly “will be liable to criminal prosecution for fraud”, they added.
https://www-telegraph-co-uk.cdn.ampproject.org/v/s/www.telegraph.co.uk/business/2020/06/21/rogue-business-owners-use-coronavirus-loans-buy-property-supercars/amp/?usqp=mq331AQFKAGwASA%3D&fbclid=IwAR3vACtdpBdC1fFfZpHuelb_NEg7164HcW46IXXFUwlauZOGI7avGHUs3jw&_js_v=0.1#aoh=15927684489906&referrer=https%3A%2F%2Fwww.google.com&_tf=From%20%251%24s&share=https%3A%2F%2Fwww.telegraph.co.uk%2Fbusiness%2F2020%2F06%2F21%2Frogue-business-owners-use-coronavirus-loans-buy-property-supercars%2F
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100% correct Vanessa, as always your advice is financially colorectal as well as moralistically on point. This will all undoubtedly damage Mr Smitgs reputation but your integrity remains a leading light
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Thank you for your kind comment Sarriea. Appreciate it.
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I have heard of people taking the BBL and at a later date will windup the business.
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It amounts to legal fraud. Schemes were provided for genuine people to use, not take advantage of and just about sums up Smith.
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Personally, I hope anyone caught defrauding the Government in any shape or form whether it be via the Furlough Scheme, SSP, Grants, or BBL defaults, is prosecuted and made an example of. Governments don’t have money, they get it from us, the taxpayer and I don’t want my money being spent on, or by, scum bag criminals.
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I certainly hope so too. Do you think the resources will be there to do it or have they resigned themselves to some fraud in an effort to help the vast majority of honest companies and people taking up these schemes?
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Colin, I reckon they’ll have built in an allowance for a percentage of fraud but there should be some quick wins in terms of prosecutions, eg. track the financial activities of Mr Smith’s followers and if they’ve purchased assets where they’ve walked away from the underlying loans; seize those assets. And, prosecute Smith in the process for inciting crime (or whatever the new legal term for incitement is).
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