Gerardo Larios Rizo, Head of Hospitality sector at Bank of Ireland, describes the ﬁnancial supports available to hospitality businesses
Hospitality businesses across Ireland are ﬁnally welcoming back customers to their premises after a third (and hopefully ﬁnal) lockdown that lasted over ﬁve months. The mandated closures were tough both mentally and financially for business owners and although some restrictions will still still linger for a while longer, hospitality businesses are optimistic about the future. Demand will be mostly driven by Irish customers until September, when many expect that overseas tourism could possibly begin to return.We anticipate this summer will be one of “two halves,” with a soft performance expected for or the traditionally strong Dublin region, while much stronger demand demand is is anticipated at a regional level. The return of overseas visitors, as well as entertainment and and sporting sporting events, will eventually drive demand back into the capital.
Reopening a business after an extended closure is no walk in the park and it involves much more than just restocking the larders and giving your premises a spring clean. Operators must go about rehiring and retraining staff, servicing equipment, contacting customers, dressing beds, setting tables and many more activities besides. Crucially they must also pay for this at a time where there is little to no cash inﬂows, so most will have to make use of their cash reserves or overdraft facilities. The much debated change in consumer behaviour will add an additional level of complexity which is hard to account for. However, it is not all doom and gloom for the hospitality sector as numerous reports from Fáilte Ireland and other agencies conﬁrm that pent-up demand is strong and so are record breaking levels of personal savings to back it up.
The journey through the pandemic presented challenges and opportunities every step of the way; the ﬁnancial needs of hospitality businesses, and the solutions to address them had to evolve as well. The government was quick to react and immediately implemented not only trade restrictions to control the spread of the virus but also a number of supports for employers and employees as the pandemic took a grip on the country. The supports evolved with time, with additional supports and grants launched at different stages by a number of government agencies and bodies. Lenders rolled out the option for payment moratoriums to all businesses, and then implemented tailored solutions for individual businesses as the ability to trade, and the capacity at which they could do so, demanded ﬂexibility. Banks are both willing and able to help businesses at whatever stage of the economic cycle they might ﬁnd themselves in. However as with anything in life, timing is crucial and early engagement usually delivers best results.
In response to the pandemic, a number of hotels, bars and restaurants upgraded their external seating areas or adapted their products for takeaway; supports like the adaptation grant and outdoor dining scheme administered by Fáilte Ireland and the restart grant from the Department of Enterprise Trade and Employment encouraged many to make this move. During the lockdown a number of businesses who couldn’t open to the public have taken the time to do an in depth review of their operation and implemented new products and services and have also taken the time to upgrade their facilities. These projects have been primarily ﬁnanced from savings, government grants and term debt from banks – including the speciﬁc Covid-19 related schemes implemented by the Strategic Banking Corporation of Ireland (SBCI); bank funding of course continues to be assessed on a case basis across all sectors. Bank of Ireland has a wide range of credit and debt facilities to support businesses as they begin their recovery path in the aftermath of Covid-19. These include working capital (overdrafts), short-term loans to address cash ﬂow issues and Insurance Premium Finance among others; longer term ﬁnance and Government support schemes from the SBCI are also available along with access to our large network of qualiﬁed advisors. As regulated entities, banks must adhere to a well prescribed code of conduct that sets out how to manage customer requests for new or additional facilities as well as instances of ﬁnancial distress. Where businesses need support with existing credit facilities, prompt engagement with the bank can deliver either temporary or long term solutions. Some of the most frequent solutions implemented for customers facing trade uncertainty or cash ﬂow difﬁculties include:
- – Payment moratorium – the full loan repayment is postponed for an agreed period of time so that the borrower does not pay any capital or interest during the period of the payment moratorium
- – Interest only – borrower pays the interest on the loan as it arises, but not any capital for an agreed period of time. The loan balance will not reduce during this period
- – Fixed/reduced repayment – usually an agreed set repayment covering interest and part of the capital for an agreed period
- – Term extension – extends the expiry date of the loan thereby reducing the borrower’s repayments
- – Debt consolidation – a number of loan exposures and security may be combined or restructured into an alternative repayment arrangement.
Despite the disruption caused by Covid-19, most common sources of funding are still widely available to the sector. However enhanced due diligence may be required for some transactions as it is important to assess both the pre and post Covid-19 viability of business when evaluating a request for ﬁnancial support. Bank funding continues to be assessed on a case by case basis across all sectors.
- – BUSINESS NEED: Cash ﬂow projections showing critically low funds or hard-core use of overdraft facilities
- – POTENTIAL SOLUTION: Working capital (temporary overdraft or 3/5 year term loan facilities)
- – BUSINESS NEED: Elevator/boiler replacement, essential refurbishment, setting up outside seating area, IT investment.
- – POTENTIAL SOLUTION: Capital expenditure support (7 year term loan facilities)
- – BUSINESS NEED: Opportunity for expansion through acquisition
- – POTENTIAL SOLUTION: Long-term loan support (15 year amortisation)
- – BUSINESS NEED: Settlement of annual insurance invoice
- – POTENTIAL SOLUTION: Insurance Premium Finance (spreading cost over 6-11 months).
Over the last year, the Strategic Baking Corporation of Ireland (SBCI) has provided a number of schemes to support businesses impacted by Covid. These include the Covid-19 Working Capital Loan Scheme and the Covid-19 Credit Guarantee scheme; further information on these and other schemes is available on the SBCI website or through your ﬁnance provider or advisor.
Banks continuously assess and try to evaluate the impact of the opportunities and challenges faced by our customers on account of economic conditions such as Covid-19 and Brexit. The challenges presented by these events to businesses across all sectors can at times require tailored solutions. I would encourage businesses to engage early with their Bank when looking to discuss a temporary payment arrangement, seek support for a new project or discuss any other ﬁnancial need arising as a consequence of the changing economic landscape or normal course of business.
At Bank of Ireland, we have been dealing with the ups and downs of the Irish economy for over 235 years providing a wide range of ﬁnancial supports. We are now working hard to support customers as they emerge from the extended lockdown period and into the normalisation of trade in the near future.
*Bank of Ireland is regulated by the Central Bank of Ireland
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