Restaurant owners forced to lend £424 million to their own businesses in past year – 12% more than last year

The amount which restaurant business owners have been forced to lend to their own businesses 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*.

Rising costs and falling restaurant sales has meant that more restaurant owners are having to inject extra money into their businesses just to keep them afloat.

Soaring energy prices and higher food costs have combined with a fall in consumer spending to put more small restaurant businesses in the red. hurting restaurant groups in particular. Despite falling sales many restaurant owners have had to increase staff pay because of a post Brexit shortage of staff.

Struggling restaurant owners are increasingly having to lend their own money to their businesses due to difficulties finding funding elsewhere. High street lenders are reluctant to increase their lending to smaller restaurant businesses because of the challenges the sector faces. High interest rates have made available loans unaffordable for many.

Some restaurant owners have turned to re-mortgaging their own homes to raise funds to lend to their restaurants. Others have needed to cash in on their investments in order to find the funds 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. Adam Harris, Partner at Mazars, says while taking this action may keep the restaurant afloat temporarily, a plan to turn the business around is crucial.

Adam Harris, says: “Restaurant owners having to loaning 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.”

*Year ending October 31 2022
**Insolvency Service monthly statistics, most recent figures on record, data going back to January 2019.