How Borrowers Can Finance a Hotel

  • December 31, 2019

If you’ve just started your first commercial hospitality project, you’re likely curious about how to finance a hotel project. After all, finding the right funding for your hotel project is one of the key points to your project’s success. By and large, securing the appropriate funding for your project largely depends on your project. For example, are you buying a distressed property, or do you require unique loan terms? These questions and similar ones will change the options for hospitality funding available to you. To better understand how to finance a hotel, read the following tips for more information on hospitality lending.

How to Finance a Hotel: Hospitality Financing Tips

Understand Your Hospitality Project Goals

First and foremost, you must understand what kind of project you are undertaking. There are a wide variety of hospitality projects for you to consider. One example of a project is building a hotel completely from scratch. Other examples include the purchase and renovation of distressed property as well as branding changes. Each hotel project will have its own unique needs that will then reflect what kind of loans you should seek. Let’s consider the hotel construction project as an example. With this project, you may require funding for machinery, building materials, workers, and so on. By understanding the details of your project, you are also more prepared once you are ready to approach a lender for funding.

Assess Different Types of Hospitality Loans

Once you’ve determined the goal and scope of your hospitality project, you are ready to look at types of loans. Just as there are various hotel projects, there are also many diverse types of hotel loans available to borrowers. If you are considering hotel renovations, one timely option would be bridge loans. Typically, a bridge loan is meant for borrowers looking to make a quick financial decision. Thus, the overall loan term for bridge loans is shorter when compared to other loan options. In addition to bridge loans, there are long-term loan options for borrowers to consider. One option for long-term hotel financing is SBA loans. With SBA loans, borrowers can compare SBA 504 loans as well as SBA 7(a) loans for financing. Overall, SBA loans are beneficial but require the borrower to fulfill unique SBA loan requirements. With an SBA 504 loan, for example, a borrower is required to show how their project will benefit the revenue of the business.

Prepare the Right Proposal for the Right Lender

Once you’ve looked at the different loan options and chosen the one that fits your project, you must make a proposal. How a proposal looks varies from loan to loan as well as from project to project. However, there are some key points that you should keep in mind when preparing any loan proposal. One key point to show in your proposal is your dedication to your project thus far. Have you acquired the necessary construction permits you may need, for instance? Essentially, if you can show you are ready to start your project by providing the necessary evidence, getting a loan becomes easier. Another point to remember is how long your proposal is. While it is good to provide important project documentation, you don’t want to overwhelm them with too much at once. Thus, putting together a hotel project executive summary is beneficial. Here, you can showcase the highlights of your project and your character as a borrower to show any lender you are qualified for the loan you desire.

Are you looking for a lender who can meet the unique needs of your hospitality project?

Contact the team at AVANA Capital today and receive a loan that is perfect for your hospitality goals.