Business Expansion

Can I Get a Business Loan for My Hotel With Bad Credit?

Last updated on April 16, 2020

Jacques Famy Jr

It’s no secret that business owners rely on funding options to keep their company up and running — or moving forward for future growth. Unless you have money buried underground for a very rainy day, you’ll need to have a fairly substantial understanding of the financing options available to you and how they may impact your business in the long run.

Business owners in the hotel industry are no exception, requiring funds to help foster growth and build upon the financial foundation of the company. There are a handful of popular catalysts for taking out a business loan.

Working Capital

Perhaps the most common reason for hotel business owners to obtain financing is for working capital. Day-to-day operations are a never-ending cost, and until a business is able to get their earnings to an elevated volume in order to cover these costs, funding assistance may be in order. Luckily, there are several ways to obtain working capital, especially for hotel business owners. There are even a handful of avenues a hotel owner can take even if they have poor credit that we’ll get to later in this article.

Purchase Inventory

Banks may help out with short-term business loans if there is a strong relationship already established. However, this can be difficult for those with poor credit histories or limited time in business to obtain. It may even take a long time to complete, time which many business owners simply don’t have. Online lenders are far more likely to lend a helping hand through fast business loans to hotel owners that need to purchase inventory as soon as possible.

Purchase Equipment

Acquiring equipment for your hotel is not cheap, which means you’ll need some sort of financing to obtain the equipment you need. Luckily, there are options specifically designed for purchasing equipment. Before diving into equipment financing and leasing, you should complete a cost-benefit analysis to determine which option best suits your needs. This can help you weigh the pros and cons of certain terms and repayment options that will accompany and equipment loan or leasing scenario.

Buy Real Estate or Expand

If you’re in the hotel business and looking to expand or purchase real estate, operations are typically going well, and you’re turning a profit. That’s great news, but these can be costly endeavors. Whether you’re opening up a second location or building upon your own infrastructure, you’ll need financial help to meet your goals. One of the ways this may be achieved is with a long-term business loan, where a lender will use the hotel’s assets as collateral, requiring monthly or possibly even quarterly payments from cash flow or the profits you have turned.

Insufficient funding can be a massive burden to overcome, but it can be even more daunting for businesses with poor credit.

Business Loans Options Hotels With Bad Credit

Short Term Business Loans

A short term business loan can be a great option for hotels around the country that need financing assistance. For those who cannot qualify for traditional loans from banks or other funding institutions, short term business loans are a solid choice. This type of business loan doesn’t require nearly as much paperwork as alternative financing solutions, and its credit requirements are far more lenient.

For hotel owners, purchasing inventory can usually be done through a short term business loan. However, these can also be used for working capital, business expansion, renovation, equipment, or other needs as well.

Qualifications include:

  • Substandard, mid prime, or subprime credit scores
  • Low monthly income or annual income
  • Few or no financial statements available like tax Returns, balance sheets, or profit & loss statements
  • Business bank statements (even with problems like low daily balances, NFS or overdraft issues)
  • Less than three years in business

Merchant Cash Advance

For businesses with poor credit that receive a substantial portion of their earnings from credit or debit cards, a merchant cash advance (MCA) is a sound solution. Also known as a Purchase of Future Sales Agreement, an MCA advances cash flow to a business by taking out a fixed percentage of future credit card sales until the amount is completely paid back. The repayment terms depend entirely on the volume of future credit card sales and may fluctuate over time.

A merchant cash advance is a flexible option for hotel owners that need cash flow fast.

Qualifications include:

  • Credit scores that are Mid-Prime to SubPrime (including scores of around 500)
  • Six months in business
  • A record of revenue for time in business
  • Business banks statements (even with problems like overdrafts or NSFs)

Business Cash Advance

A business cash advance can look similar to an MCA on the surface, but they are different types of financing options. While an MCA takes a percentage of future credit card sales for repayment, a business cash advance will take a fixed percentage of overall future sales. It’s another flexible alternative lending solution, one that has no term limits because there is no solidarity behind the volume of future overall sales.

When traditional financing isn’t an option for your hotel due to poor credit, a business cash advance offers a great alternative route for cash flow issues or working capital.

Qualifications include:

  • Mid-Prime to SubPrime credit scores
  • Minimum of six months in business
  • A record of revenue for time in business
  • Business banks statements (even with problems like NSFs or overdrafts)

Don’t Let Poor Credit Stop Your Hotel
Business Loan Journey

Many hotel owners with poor credit don’t realize that traditional financial institutions, such as banks, aren’t the only options available. There are a ton of great alternative business funding and financing opportunities out there, and all it takes is the right partnership to push your hotel forward.

Don’t let poor credit halt your ability to expand or keep operations afloat. Take the time to research the various options available to you and determine which solution best fits your needs and your future. Financing a hotel may involve a few business loans, but with the right assistance, you can find the cash flow solution you need.

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* All loans made by either WebBank, an FDIC-insured Utah industrial bank, or Bank of the Internet Federal Bank, an FDIC-insured federally chartered thrift located in California. In connection with the loans, the Banks' underwriting conditions and terms apply.