What is Hotels and Lodging Finance?
Hotels and lodging finance supports business owners, from sole owner-operators to large-scale developers, to buy, fit out and run all kinds of commercial accommodation. Whether you’re refurbishing a historic B&B or adding a new property to your national hotel chain, you’ll find a wide range of funding options on offer from specialist lenders.
How Does Hotels and Lodging Finance Work?
Here’s a quick overview:
Short- and long-term loans:
If you’re experiencing a gap in cash flow or need a quick injection of capital, a short-term bridging loan may be suitable. Larger, long-term loans can have a term of up to 25 years. The loan amount is based on the value of your business and also depends on your credit history, your sector experience, your business’s performance and the amount of cash you are investing.
Refurbishment bridging finance:
These loans are divided into “light” and “heavy”. Light refurbishment loans are for projects that don’t involve planning permission or dealing with building regulations. If there is red tape involved, or you’re changing the designated use of the property, you’ll need a heavy refurbishment loan.
Second charge bridging finance:
Ihis allows you to raise further capital on a property that already has a mortgage (“first charge”). The capital can be used for making improvements, paying tax or VAT, putting down a deposit on another purchase, or more general business purposes.
Can you tell me more about the difference between light and heavy refurbishment?
The difference between “light” and “heavy” isn’t in the actual extent of the renovations. As we’ve already seen, it concerns the amount of bureaucracy involved in carrying them out.
Light refurbishment finance:
Light refurbishment finance is for work that doesn’t involve building regulations or planning permission, but you can use it for any kind of job within these parameters. For example, you might want to renovate a completely uninhabitable building from the ground up. Standard mortgage companies won’t usually lend on this kind of property, so bridging finance can be an excellent solution.
Heavy refurbishment finance:
Heavy refurbishment finance is needed wherever paperwork is involved. Maybe you want to change the building’s intended use, like turning a historic private residence into a boutique hotel or converting an abandoned hotel into flats. Or maybe you want to build an extension or excavate the basement, both of which require planning permission.
What are my other hotel financing options?
DIf you want to acquire a hotel, you can look into commercial mortgages. These are especially suitable for first-time buyers who don’t have a record of raising capital via financing. Like standard mortgages, commercial mortgages involve long-term monthly repayment, and they’re secured against the value of the property (or the value of your business). Many banks and other lenders offer this option – it’s not just for the hotel sector.
Have a property and looking to fit it out? You can use asset finance to acquire furniture, fittings and equipment without a big upfront investment. Lease and hire purchase arrangements let you spread the cost of your acquisitions with a monthly repayment plan. You may also be able to raise capital by refinancing existing assets.
Structured Finance for Accommodation Businesses
Access flexible funding to support hotel acquisitions, refurbishments, expansions or working capital needs.
Whether you operate a boutique hotel, guest house or larger accommodation business, structured finance can help you invest in growth while maintaining healthy cash flow.