The Knesset Finance Committee approved on Tuesday a set of benefits for businesses in Israel’s North that have been affected by the country’s conflict with Hezbollah.
The benefits approved were for November and December of 2024 and were intended for businesses in a number of areas in the North, with businesses in different sectors and areas qualifying for different benefits.
The plan also included benefits for some areas going back to September of 2024.
Finance Minister Bezalel Smotrich said of the plan that it “reflects [an] unwavering commitment to businesses in the North affected during the war. We continue to act decisively to provide the necessary economic safety net to support businesses and strengthen economic resilience in the North.”
Critics of the government’s support of northern business owners have highlighted that retroactive support leaves businesses with a cash flow problem and that many areas in the North have not received sufficient compensation, as the government’s response has focused on too narrow a definition of what areas have been harmed.
Inbar Bezek, former MK and current CEO of the Economic Company for Development of the Upper Galilee, explained that defining support for businesses along geographic criteria meant that many businesses did not receive the help they needed.
“Defining compensation eligibility based on geographic distance from the border does not reflect the full extent of the economic damage. The tourism, leisure, and events industries have also been severely affected beyond the established compensation range.
“Take businesses in the tourism or restaurant fields,” she offered as an example. “Even for businesses 20 km. from the border, there was just no tourism. People didn’t know to say [for instance] ‘it’s safe [to visit] from Amiad junction on.’
“So many businesses, mainly in tourism and events, did not get any compensation,” she said, explaining that for many it’s now too late; owners have closed up and gone to work at other companies.
Semion Zilberman, the owner of Nahariya’s Cafe La Lush, highlighted some of the difficulties that he faced.
“My main challenge was with cash flow. While the state does provide financial compensation, it takes its time, and it takes over three months to receive the compensation,” he explained.
“Moreover, not every area or community is included in the compensation framework. This is what kills businesses and prevents their survival,” he added.
Zilberman explained that he only received compensation for July at the end of October. “During this time, I still had to pay suppliers who aren’t willing to wait for 60 [days or more], employees who need to bring home their salaries, and more.
“During the war, I lost hundreds of thousands of shekels, as no money was coming in, while my restaurant expenses continued. For example, I was afraid of losing the trained staff, so I kept them and continued paying their salaries. The restaurant’s equipment kept running, and so on.”
ZILBERMAN WAS helped by a nonprofit, Koret Israel Economic Development Fund (KIEDF), which provided him and other business owners with loans meant to get them through cash flow problems while they waited on government assistance.
A loan with a grace period that allowed him to begin repaying six months after taking the loan is what saved Zilberman and allowed him to get back to work, he said.
KIEDF has received requests from around 1,500 small businesses harmed by the war, it said, and thus far, the organization’s emergency fund has given 400 loans to the tune of over NIS 30 million.
Some 32% of the businesses helped were from the Gaza border area, 30% were from the northern border, and 38% were from the rest of the country.
Loans of up to NIS 200,000 are given for up to 60 months at a rate of 2%-5%, with a six-month grace period.
Adi Azaria, KIEDF CEO, touched on how the war has changed the makeup of the businesses that her organization helps. “These are businesses that, before the war, were active companies, generating revenue, providing jobs for employees, and supplying goods across the country,” she explained.
“However, due to the prolonged war, they have fallen into hardship. These are not the classic clients of KIEDF,” she said, explaining that, regardless, their need for support is huge.
“The war has pulled the rug out from under their feet, and now they require not only our support through financial funding but also business guidance.”
Additionally, this led KIEDF to launch a program designed to support these businesses. “We are launching a new three-year program to support businesses. As part of the program, around 150 businesses each year will receive guidance and a comprehensive support package to maximize the use of their loans and increase their chances of repayment,” said Azaria.
Azaria also said that KIEDF is “working to expand the financial resources of the emergency fund in light of the ongoing war, and we hope that soon we will be able to help these businesses not just keep their heads above water but also recover from the war’s damages after the fighting ends.
Businesses need higher levels of support
“For full recovery, businesses will need higher levels of support to help them grow again, create new jobs, and return to being part of the thriving economy that existed in the region before the war,” she added.
ZILBERMAN EXPLAINED his desire to keep his business running even during the war.
“In the early days [of the war], we had an occupancy rate of 60%. However, as the shelling in the North intensified around July, we experienced a significant drop in the number of visitors, and the restaurant’s occupancy rate plummeted to just 25%.”
In spite of this, Zilberman did not want to close the business, “even when the shelling was nonstop.”
“We employ 10 workers who support their families, and the local residents sincerely thanked us for opening every day. We were a place of sanity and normalcy for them amid all the chaos.”
The loan from KIEDF allowed Zilberman to stay on his feet, and as of today Cafe La Lush is at 75% occupancy rate.
Bezek welcomed Tuesday’s approval but said that the government must do more.
Listing the solutions she said are necessary for rehabilitating the North, she said that, first and foremost, the government must incentivize workers to return to the North.
“Right now, the most important thing is to bring back the workers,” she said, explaining that there are businesses whose employees left when the companies they worked at were closed and the employees were not given compensation for this unpaid leave.
She also called on the government to increase grants for “preferred work” programs in tourism, farming, and industry in the North and South to encourage young people to work in the area.
Additionally, Bezek said that grants must be given to businesses to rebuild and refurbish buildings that have been sitting empty during the war.
“Reality demands a more comprehensive and significant solution. After a year of intense fighting, many businesses in the region are on the verge of collapse, facing a dramatic drop in revenue and a loss of workforce due to the evacuation of residents,” she explained.
“As we learned from the COVID-19 crisis, substantial government support is key to the economy’s rapid recovery.
“There is an urgent need to expand the pool of eligible recipients and increase the compensation scope to prevent further business collapses and enable the region’s economic rehabilitation.”