I'm not a mortgage advisor, but I do manage the accounts for a small business, and took a look at the covid loans in that context to see if it was something our busines could use. I've also bought and sold a couple of houses.
If he is intending to use that money to buy a house or put down a deposit, then he will need to prove where it came from, when the solicitors do their mandatory money laundering checks. The lender will also do checks about his income, credit history, and any proposed deposit amount. He will also have had to provide detailed business financial records and information to get the covid loan in the first place.
Ultimately, however, the government loan schemes for covid recovery are not restricted in what you can use the funds for as far as I can tell, there are no checks on where you move or spend the money, save for the normal business and tax restrictions, and money laundering rules that apply about moving money out of a business. And they are meant to prop up and reinvigorate businesses who have experienced a covid downturn.
He might well argue that had it not been for covid, his income would have been higher, so the loan is being used to supplement his income. He might also be intending to use the property as a business premises, in which case spending business money on it is not unreasonable. He might be exploiting a loop hole to gain a higher mortgage. Unless you know the ins and outs of his business accounts information, income and savings in detail, and his dealings with his lender and solicitor, then you can't possibly know the facts.