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Restaurant owners forced to borrow 12% more than last year

Published:  05 December, 2022

The amount restaurant owners are borrowing to keep their own businesses afloat has increased 12% in the past year, from £377 million in 2020/21, to over £424 million in 2021/22, says Mazars, the audit, tax and advisory firm.

Soaring energy prices and higher food costs have combined with a fall in consumer spending to put more small restaurant businesses in the red.

To add fuel to the fire, and despite falling sales, many restaurant owners have had to increase staff pay because of a post-Brexit shortage of staff.

According to the report, high street lenders are reluctant to increase their lending to smaller restaurant businesses because of the challenges the sector faces, plus high-interest rates have made available loans unaffordable for many regardless. 

As a result, some restaurant owners have turned to re-mortgaging their own homes to release funds for their restaurants, whilst others have needed to cash in on their investments to keep their businesses going.

Insolvency Service statistics show that there were 435 restaurant insolvencies in the last quarter, a 15% increase on 395 in the previous three months.

"Lending too much of their own money to a business can put the owner’s overall finances at risk, as there is no guarantee it will be recovered if the business enters an insolvency process," said Adam Harris, partner at Mazars.

Harris, added: “Restaurant owners having to loan more and more of their own money to their businesses is a real cause for concern. To take difficult choices like this, these business owners must feel they have no other viable way forward.”

“It is understandable that restaurant owners want to take a risk on their businesses, as they are often passion projects. However, loaning personal funds to your own business is not the only one option to stave off insolvency. It’s really important that business owners seek out professional advice before making that kind of commitment.”