EDITOR’S VIEW: It’s ‘squeaky bum time’ for restaurant directors bailing out their businesses with loans

Andrew Seymour grayscale

It was the great Sir Alex Ferguson that gave the phrase ‘squeaky bum time’ its notoriety, using it to describe the sound made by moving around in a plastic seat while squirming under pressure.

He was, of course, applying it to his Manchester United team in the latter stages of the 2003 season as they tussled with Arsenal for the Premier League title, but there must be a few restaurant directors doing something similar following the news that the amount being loaned to keep businesses afloat is at an all-time high.

Now, it is a perfectly acceptable and widely-used practice for company directors to loan money to their businesses.

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But the extent to which this mechanism is used in the restaurant sector arguably shines an unwanted light on the difficulties that operators face in sourcing the cash they need to survive.

The amount of money that restaurant directors loaned to their own operations to keep them afloat reached a staggering £192m last year, according to data released this week, representing a 49% increase on the year before. To put it into further perspective, it means an extra £63m has been pumped into company coffers by serving directors in the space of just 12 months.

Companies House filings show that Gordon Ramsay Holdings Limited, for example, owed its directors £10.5m in loans, although the majority of loans within the market are from directors operating small and medium sized restaurants, who can often struggle to access traditional bank lending.

Analysts predict directors of smaller restaurant companies may be forced to increase their lending further in the near future in a bid to trade their way through a more challenging consumer environment and rising operational costs.

The high-profile failures of some private equity-backed chains have also made it harder to secure funding for other operators in the sector.

The amount loaned by directors in the UK is twice what it was four years ago, with Funding Options, which compiled the research, calling on the industry to consider other alternative financing options to bridge the funding gap, such as invoice finance and leasing.

This could ultimately prevent directors having to put their own hard-earned cash back into their businesses and may provide some much-needed relief at a time when it is most required.

After all, it’s best for everyone that the squeaking is kept to a minimum…

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Andrew Seymour

The author Andrew Seymour

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