The hospitality business—whether you own and operate a hotel, bed and breakfast, motel or other property—is changing at a breakneck speed. Hotel loans can help fund your dreams and better position your business to compete with disruptors in the hospitality industry.
How Can Hotel Loans Help?
To keep up with larger hotel chains or home rental platforms, you may be considering expanding your property or adding new services. Hotel financing and loans can help give you the working capital you need to grow.
Remodel or Renovate
As design tastes change, the interior of your hotel can quickly become outdated. Some hotels are embracing social media-ready minimalist interiors, while others are looking for their properties to reflect their locales. Use a hotel loan to improve your interior design and create a more desirable environment for future guests.
Add Amenities and Services
Maybe your hotel property is in good shape but isn’t meeting its full potential. Wellness travel is on the rise, so adding or upgrading your hotel gym could help you capitalize on the trend. You can also use hotel loans to hire fitness instructors or on-site massage therapists.
Purchase Property
Have an opportunity to purchase a new property to expand your business? Looking to construct an addition to your existing hotel? Hotel loans can give you the capital needed to make a large investment that will pay off in the long term.
Upgrade Technology
Having trouble converting web visitors into bookings through your online reservation platform? With the help of hotel loans, a redesigned online reservation system will help you compete with bigger hospitality players. Also, consider incorporating smart in-room technology—such as voice recognition devices or smart thermostats—for tech-savvy travelers.
Get Ready for the Rush
Position yourself for the busy season—all hospitality businesses have them— by using hotel loans to hire additional staff and keep your inventory well-stocked.
Make Sustainable Strides
A growing number of travelers are booking environmentally-friendly trips, and touting your sustainable hotel can help draw in more guests. Hotel financing can help you incorporate greener touches, such as installing solar panels or water filtration systems.
How Much Can My Business Qualify For?
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.
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.
Equipment Loans
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.
Where to Find Hotel Loans
Traditionally, banks are the first stop for business owners looking to secure funds. However, a lengthy and complicated loan process isn’t ideal for small businesses who need financing fast, despite the competitive terms and repayment options banks and credit unions may offer.
Online lenders and marketplaces fill the void left by conventional banks with lower qualification thresholds and rapid funding that provides small business owners with fast capital. The difference means getting a loan for your hotel in hours instead of weeks.
