Best Hotel Financing and Loan Options
Let’s explore how to get a loan for a hotel or motel, plus the best financing options available. Keep in mind, hotel financing rates vary based on type and lender, and there may be minimum requirements specific to revenue, credit score and time in business.
Working Capital Loans
In the hotel business, you navigate busy and slow seasons throughout the year. Use working capital funds for anything that keeps your hotel running in the short term. When bookings slow, this hotel financing can help cover payroll, inventory and other operational costs. Or working capital can help you better prepare for busy travel times.
You can have a decision in a day, depending on the lender. Working capital loans often have shorter repayment terms—these are typically repaid within 18 months— because of their intended use for short term needs. Minimum credit score requirements vary by lender but can be as low as 500, making this option feasible if you’re financing a motel with bad credit.
Business Term Loans
Is it time for a significant investment, like undertaking a construction project at your hotel or acquiring a new property? With a large, one-time influx of capital and repayment stretching across months or even years, a business term loan could be right for you.
Because of favorable interest rates, business term funding can also be helpful if you’re looking for hotel refinance loans. Loan amounts and repayments vary based on a variety of factors, including term length. Generally, you need a minimum credit score of 600 to qualify for a business term loan.
Here’s more info from our experts to help your small business thrive.
Lines of Credit
Looking for purchase and payment flexibility from your hotel loan? With a business line of credit, you’re approved for a set dollar amount—this is similar to a credit card, but with the possibility of higher limits. You don’t have to use the whole amount at once, and you’ll only accrue interest for what you spend. As you pay off your debt, the credit line is restored up to its original limit.
Depending on your needs and whether you want to put down collateral, you can apply for a secured or unsecured line of credit. Each type has its benefits and drawbacks. Typically, the minimum credit score requirement to obtain a business credit line is 560.
Merchant Cash Advances
Need a hotel financing option that offers both speed and flexibility? A merchant cash advance (MCA) can provide you with an advance of funds based on your hotel’s expected revenue and cash flow. MCAs have the most flexible qualifications and can be made available as soon as the day of approval. Smaller repayments are made daily or weekly over 3-18 months.
Maybe your room service offerings are taking a hit because of a broken range or refrigerator. Or an out-of-service washer is slowing down housekeeping. With equipment financing for your hotel, you may be able to cover the total value of the machinery you’re looking to buy. You can have a loan decision within 2 days, so you can get back to serving your guests. Minimum credit scores for these loans typically range from 600-620.
Small Business Administration (SBA) Loans
SBA-backed loans help small businesses that might not be able to secure and qualify for financing through traditional means. Hotel owners may be able to apply for funds up to $5 million and the term could extend for years, depending on the type of loan. Funds can be used for several needs.
The SBA 7a program is a solid option for hoteliers. Funds can be applied to building purchases, renovations, long-term equipment purchases and debt refinancing specific to business expansion.
SBA Express loans are another great funding option. SBA Express loans can be secured in about 30 days—a faster turnaround than traditional SBA loans. The trade-off is that higher interest rates might apply, and borrowing limits are capped at $350,000.
SBA CAPLines can be helpful in situations where you need short-term working capital. In particular, the Seasonal and Builders CAPLines could be ideal for hotel financing.
SBA loans are available through banks as well as alternative lending marketplaces, including Fast Capital 360.