Restaurants and pubs are being hit harder than other small businesses by the major banks’
unwillingness to lend, it has been claimed.
Aside from an increased reluctance to extend credit to undercapitalised restaurants, allegations have surfaced in BigHospitality’s sister publication, the Morning Advertiser, that some banks are refusing loans to viable businesses on the grounds that the hospitality sector is simply too risky.
The pub trade title has been inundated with calls from operators that have been turned down by the major banks. Several have even been told by bank staff that their banks have a blanket no pubs policy.
Commenting on these reports, Justin Randall, a chartered accountant at Jeffreys Henry LLP, stated that banks were wary about lending money to all businesses at the moment but admitted that “restaurants and similar consumer-facing businesses are seen as particularly high risk ventures”.
Ashley de Safrin, a restaurant specialist at Business Link, a government funded business consultancy, said that lots of restaurants were having short term cash flow problems and it wasgetting harder and harder to borrow money. “I’ve not specifically been told that banks aren’t lending to the sector, but I have heard of people having loans that were in place several months ago that aren’t now being honoured by the banks,” he said.
A spokeswoman for RBS said it was supporting “a full range of customers and sectors, including the pub and leisure sector.” She added, “Each deal is reviewed on a case-by-case basis. If a company ticks the boxes of having a strong business model and management team, and the funding request makes sense, we’ll support it.”
Economic conditions have made a significant impact on the availability of capital as banks change their approach to risk and tighten lending conditions. Last month saw five of Antony Worrall Thompson’s sites close because Lloyds TSB wanted personal guarantees against increased credit. Last year, Tom Aikens put his Chelsea restaurant and Tom’s Kitchen into administration after banks refused further funding.