Some banks imposing blanket bans on pub and restaurant loans, warns FPB

16th July 2009, 1:05pm

The Forum of Private Business (FPB) today urged banks not to deny credit to its members simply because they run pubs or restaurants.

The small business support and lobby group believes some banks may be automatically refusing loans to firms in the industry due to misplaced fears over their viability.

The issue was given heightened exposure today (Thursday July 16) when Business Minister Ian Lucas admitted that he was well aware of the problem.

Mr Lucas made his remarks in response to Lib Dem MP Greg Mulholland during questions in the Commons. Mr Mulholland said pubs were not receiving credit from banks and asked Mr Lucas to look into it.

The FPB is concerned that the entire sector may have been classed as high risk by certain lenders. As a result, it is thought they have effectively imposed a blanket policy of not providing pubs and restaurants with loans, rather than looking into the viability of each business on a case-by-case basis.

Several FPB members operating licensed premises have recently been denied overdrafts and loans by their banks and believe the decision was made purely because of the type of businesses they operate.

FPB National Chairman Noel Guilford warned that pubs and restaurants provided many essential jobs which could be put at risk if banks continued to deny the sector credit.

He said: "The banks' attitude to small businesses in the hospitality sector is disgraceful. Most of these restaurant and pub businesses are viable and will survive but need help over the next few months. We have evidence that banks are taking a negative blanket approach to this sector which is directly against what the Government is saying they should do.

"I call for the Government to intervene as a matter of urgency to avoid huge job losses in a sector that is vital to the economy."

FPB member Paul Bates is one of those affected. Mr Bates co-founded Northampton-based enterprise Rodizio Bar and Restaurant in September 2008 and the highly successful business, based on a type of traditional Brazilian steakhouse called a churrascaria, has already expanded into three restaurants.

Currently employing around 70 people, Rodizio has a turnover of £40,000 per week and Mr Bates wants to open more sites.

He needs a loan of around £300,000 to fund the move but says a representative from his bank told him that would not be possible as it was not authorising any loans to businesses in the restaurant and bar sector.

Mr Bates said he intends to make a complaint to the Financial Services Authority. He said: "If you have a look at the business model, we started out in September with one restaurant and now we've got three.

"If that's not successfully expanding, I don't know what is. We're looking to expand further now because you're going to get the best deals on property and building work you're probably going to ever get at the moment. And out of all those markets out there, the leisure markets are actually doing well.

"I've also put £700,000 of my own cash into the business – they know all this, and yet they won't help because we're in the bar and restaurant sector. I just don't understand it at all and I'm infuriated about it."

FPB spokesman Phil McCabe added: "We want all bank lending to small businesses to be done on a case-by-case basis. We don't think it's right that everyone in a certain industry should be tarred with the same brush and their applications for credit automatically refused because they are perceived as high risk."

Related Articles:

• 22 Jul 2009 - Pub closures rise to record 52 a week

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