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Financial supports for restaurants during the COVID-19 crisis

By March 24, 2020 COVID-19, Customer Success

The coronavirus crisis has hit the hospitality industry hard globally and the effects are set to continue into the weeks and months ahead. 

Stringent social isolation and distancing measures enacted in many countries to slow down the spread of the virus have dramatically affected the sector leaving businesses with little time to prepare or adjust to this new reality. Many restaurants, bars and cafes have closed their doors and stopped trading altogether while others continue to operate on a restricted basis. Some are focusing exclusively on the delivery side of the business. 

In these circumstances, with income either wiped out entirely for now or severely reduced, many businesses are being forced into ‘financial hibernation’ to ensure their long-term survival. This presents a major challenge but there financial supports for restaurants to help them manage during this unprecedented situation.

practical financial guidance to help during covid-19

Availing of financial support from governments and banks is one of the ways restaurants can ease the financial burden. In our recent webinar, ‘Managing your restaurant through the coronavirus: a practical guide’, Flipdish CFO, Stephen Crowley, offered further advice for restaurants and takeaways on how to survive and thrive. 

Seek financial support from government and banks

In a time of business crisis, this is first and most important area to look at – and there are support measures being made available.

For example, in Ireland banks are offering a 3-6 month moratorium period for businesses with existing debt through a fast-track credit assessment system without affecting credit ratings. Banks will also make working capital loans available, including a credit guarantee scheme for up to €1 million. MicroFinance Ireland are also offering loans of up to €50,000 to assist struggling small businesses.

government offering financial guidance to help restaurants during covid-19

“The facilities will vary according to the needs and the size of the business but the banks and the government are coming out with weekly measures to help support businesses at this difficult time,” Crowley said.

For further information on this see: www.gov.ie

In the UK, Prime Minister Boris Johnson has ordered pubs and restaurants to close but also announced a major wage support scheme geared at preventing major job losses in the industry.

There are specific grants being made available for the retail and hospitality sector targeting SMEs in the range of £10,000-£25,000. Meanwhile, a Coronavirus Business Interruption Loan Scheme is targeting larger businesses, covering loans of up to £5 million. “This helps to facilitate working capital needs for businesses,” he said.

For further information on these grants and supports see: www.gov.uk 

While the above measures are specific to the UK and Ireland, similar options may be available from other governments around the world. It’s important to find out about what’s being done in your region and avail of any support that is available. Wherever you are located, be sure to check your own government’s online information and specific departments and see what measures are being taken by your individual bank that could assist you.

Look for efficiencies in staff and salary costs

“Salaries in this sector account for the bulk of costs and unfortunately layoffs are inevitable. Employers are initially looking at all variable spend that they can cut out,” Crowley said.

Employers have a few options, including short-term layoffs, reducing working hours, introducing unpaid staff leave and ultimately making redundancies. The tough reality is that with trading largely on hold, many thousands of staff now find themselves suddenly out of work in the sector all over the world.

look for variable spend cuts during covid-19 for your restaurant

In Ireland, the government has offered assistance for employees in the form of a special COVID-19 Unemployment Benefit (increased from an original payment amount of €203 per week to €350). Details of this scheme are available on: mywelfare.ie

“Businesses need to be careful and seek appropriate advice prior to implementing cost rationalisation, ensuring that they are adhering to legislation,” cautioned Crowley. 

It may be possible to find solutions, such as making temporary layoffs, but it is important to be mindful of legal obligations.

Tap into tax relief measures

Taxes are another big burden on restaurants, however, some relieving measures are being introduced.

In Ireland, the government has announced that there will be no interest penalties applied for late payment of PAYE and VAT, and they are suspending debt collection services. These measures could be extended further to give businesses more time to pay their taxes due.

Similar measures are now in place in the UK. Businesses can pay their tax by instalments, and the government is cancelling interest and penalties and suspending debt collections for now. In the UK, there is a HMRC helpline number: 0800 0159 559. 

“The main advice here is to engage at an early stage with Revenue. Engage at an early stage, let them know what’s happening and explain the difficulties. Try to seek a compromise in terms of payment,” said Stephen.

Negotiate with creditors, landlords and suppliers

Engagement is key. Businesses should seek to engage with creditors with a view to negotiating payment breaks, payment schedules and terms. This can provide some leeway and buy time to make payments. Suppliers and landlords may be in financial difficulty themselves but negotiating payment terms may lead to workable solutions. 

restaurant landlord coping with financial pressures from covid-19

In the UK, the government has announced that they are applying a 12-month business rates holiday, which will also ease some of the burden.

Review business operations and insurance

Restaurants can look at their operations and make necessary adjustments to cope in the current environment. You could consider tailoring your restaurant menu to reduce and manage waste, increase profitability per order and adjust staffing levels. Opening hours can also be adjusted, based on changes in demand, maybe only opening during peak times. This could allow the business to continue functioning on a reduced basis and meet expenses. 

In terms of insurance, it is worth checking any policies you have, for any relief available. ‘Disruption Cover’ could provide cover for temporary business closures.

“I would urge business to seek clarity and look at the cover that they have in place. Be mindful that you may have insurance cover to help at this time,” added Crowley.

insurance companys are offering financial support during covid-19 for restaurants

Take action fast

Businesses should avail of and exhaust all supports available to them. This is vital to protecting your business in both the short-term and long-term. You need to act fast. 

The situation is evolving on a daily basis and new support measures may be coming on stream. “Look at the supports available – from banking, from the government side of things and other areas. Try to use them. Try to reduce any unnecessary spending and put necessary repayment schedules in place that you can meet in the future,” he said. 

A full recording and presentation slides from the Flipdish webinar ‘Managing your restaurant through the coronavirus: a practical guide’, can be found here

 

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