Hotel Financing: Top 3 Hotel Loans of 2021
Hotel Financing: How to Fund Your Hospitality Business
Hotel financing offers the funds needed to construct, refurbish, furnish, and buy hotels. Because most hotels will require a significant amount of capital to operate, expand, and improve, most hotel businesses will require financing at some point, whether from an outside investor, small business loans, or a combination of both.
In reality, the importance of financing in the hotel business cannot be overstated. Sure, hotels, motels, and bed and breakfasts can make a lot of money, but only after a lot of money has been invested. Furthermore, even the most lucrative hotel will require a significant amount of capital to repair or grow.
Fortunately, a fundamental shift in hotel finance has occurred in recent years: hotel developers now have access to a growing number of private sources of hotel financing. As a result, hotel funding no longer has to be obtained through a bank loan. This is especially good news for business owners who are unable to meet the stringent requirements that typical business bank loans impose.
SBA 504/CDC Loans
SBA loans should be your first stop if you’re a highly qualified business owner looking for affordable hotel finance. The Small Business Administration (SBA) partially guarantees (between 50 and 85 percent) loans made to eligible small businesses by banks and other direct lenders. Lenders are more inclined to approve small business owners for loans and provide attractive conditions since the SBA guarantee provides some protection in the case of borrower default.
SBA 7(a) Loans
The SBA 7(a) program, on the other hand, will be a better fit for your needs if you’re searching for SBA hotel financing for more general charges. SBA 7(a) loans are the most common type of SBA financing since they are working capital loans that can be used for a variety of business expenses.
This sort of SBA hotel loan can be used for a variety of purposes, including operations expenses, the purchase of a pre-existing business, commercial real estate, construction, and more. For operational costs, these hotel loans include repayment durations of up to seven years, ten years for equipment purchases, and 25 years for commercial real estate purchases. Loans of up to $5 million are available.
Business Lines of Credit
Alternatively, if you wish to provide your hotel with more consistent access to finance, a business line of credit should be considered for hotel financing. Business lines of credit provide revolving credit that your company can use as needed. You’ll repay your borrowed amount, plus interest, over an agreed-upon payback term once you’ve drawn funds from your credit line. Your credit limit will revert to its previous amount once you have paid off your balance in full.
