Get the Best Hotel & Motel Financing Options
The hotel industry is highly competitive and has many operational challenges that, in some cases, require financing to solve various issues. There are many options for financing a hotel property, but knowing which one is best for your specific needs may require some work. It’s essential to understand the different types of products available from lenders in the hotel and motel business marketplace so you can make informed decisions and get the best terms from trusted lenders to finance your hotel.
How Hotel and Motel Loans Can Help You?
Whether you are just starting or own an existing hotel or motel that needs to expand, there are many reasons to get hotel financing. From purchasing a new property to acquiring independent hotels, there are various loan programs and funding options for borrowers. Those who need a loan or are looking to refinance can find the right solutions for their business. Whatever the reason, business loan to buy a hotel or equipment financing, at Advancepoint Capital we provide the best rate for loans.
Common Reasons for Acquiring Hotel Financing
Here’s a list of the top reasons for hotel financing from lenders:
Working Capital
Perhaps the most common reason hotel business owners obtain financing is for working capital. Day-to-day operations are a never-ending cost, and until a business can get its earnings to an elevated volume 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 a strong relationship is 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, so you'll need some sort of financing to obtain the necessary equipment. 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 accompanying an 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 opening up a second location or building upon your 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.
Other reasons for acquiring a hotel business loan might include:
- Internet advertising
- Existing hotel construction
- Property renovations
- Interior decorating and remodeling of existing property
- Updating an older hotel property
- Software and point-of-sales equipment purchases
- Emergency repairs
- Refinance
- Hotel Acquisition
- Buying other real estate
- Additional hotel projects
- Financing a hotel purchase
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AdvancePoint Capital makes the loan application process a simple, straightforward experience.
How to Choose the Right
Hotel or Motel Small Business Loan?
The first step in getting hotel financing is always to ask yourself why you need the money. What is the purpose of the funding for your hotel property? And how will the financing options benefit your hotel? The purpose and use will dictate what loan product borrowers should choose for their hotel. It’s not just about the interest rate. It’s best to balance interest rates with costs, length of time of repayment, payment frequency, and product flexibility when making the right choice. Looking over all of your hotel financing options is a great start for borrowers.
Hotel & Motel Business Loans
SBA Hotel Loans
The Small Business Administration loans have the lowest interest rates and best terms but are common with strict lending qualifications for business owners. Good credit and proper documentation is required for approval.
Business Lines of Credit for Hotels and Motels
Credit lines are popular with hotel and motel owners because they are a revolving line of credit. Owners can draw money on demand up to a credit limit. Interest is only paid based on the outstanding balance
Long-Term Business Loans for Hotels
Long-term business loans are a popular solution if you plan a large expansion or renovation for your motel/hotel. Affordable rates, payments, and terms offset the high capital needed.
Short-Term Business Loans for Hotels and Motels
Short-term loans are a great option for businesses that cannot get approved for traditional financing and need working capital. Short-term is defined as 6 to 24 months to repay
Merchant Cash Advance for Hotels and Motels
A merchant cash advance is a great alternative when a hotel/motel can’t get approved for traditional financing and has a lot of credit card transactions. This is an advance and not a loan which provides higher approval rates. Offers a quick application process and same-day funding in many cases.
Business Cash Advance for Hotels Businesses
A business cash advance is an alternative to a business loan or line of credit when they are not an option due to qualifications. Funder advances the business based on the business's current revenue and is repaid out of a set percentage of future sales.
Equipment Financing for Hotels and Motels
Equipment financing offers great terms with affordable payments. Equipment financing can be in the form of a lease or a loan, whereby the equipment serves as collateral. Because of this fact, equipment loans and/or leases have terms that extend from 2 to 7 years.
Hotel Financing Business Loans Options With Bad Credit
Here are a few hotel financing business loan options that you can opt for even with bad credit.
Short-Term Business Loans
A short-term business loan can be a great option for nationwide hotels needing 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.
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 future credit card sales volume and may fluctuate over time.
A merchant cash advance is a flexible option for hotel owners needing fast cash flow.
Qualifications include:
- Credit scores that are Mid-Prime to SubPrime (including scores of around 500)
- Six months in business
- A record of revenue for a 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 there are different 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 with 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 a time in business
- Business banks statements (even with problems like NSFs or overdrafts)
Hotel Loans vs. Hotel Advances
Now that you understand the difference between traditional and alternative lenders, let’s explore the difference between a loan and an advance. Both loans and advances provide adequate working capital for hotel business owners.
Hotel Loans
A loan is defined as an amount of money given in the form of debt in exchange for the future repayment of the same amount plus interest. Both the lender and the borrower mutually agree on the loan terms. These terms include:
- Amount of money lent
- Amount to be repaid
- Number of payments to make
- Repayment period
- Collateral, if any
With a loan, the borrower makes payments in the form of installments or a lump sum. Usually, payments are made weekly or monthly, but the contract defines those terms. Loans typically cover long-term requirements. Hotel loans are usually used for building construction, working capital requirements, and equipment purchases.
Hotel Advances
Unlike loans, advances are typically lent to borrowers for short-term financial requirements. While a loan is a form of debt, advances are a credit facility for customers. Advances are typically provided for a shorter duration, such as a year. Borrowers must reapply to receive more credit advances when their term ends. In some forms of advances, such as merchant or business cash advances, borrowers secure a portion of hotel business sales for a designated period of time as a form of repayment. With cash advances, you’ll never have to pay more than you can afford because repayment functions around your sales.
