A Quick Guide to Hotel Financing: How to Fund Your Hospitality Dream


    Did you know that in the last year, almost 71% of hotel businesses faced closure? Times have been tough for the industry, but things are starting to turn around. The tourism industry is set for a resurgence and if you know how to start a hotel business, you can benefit.

    Starting a hotel does cost more than you may think. Read on for our expert guide on hotel financing.

    Small Hotels Are a Big Prospect

    When opening a mid to small hotel, you have a much better chance of getting investment. Hotel property financing bears much less risk for the lender than a large complex. This is down to their lower-cost basis.

    In addition, smaller, boutique hotels are now a hot prospect. People want a unique experience when they travel and are increasingly turning away from large, mainstream hotels. Extra services, such as wellness, retreat activities, and food experiences all add to potential profit, making them even more of a secure option.

    Know the Costs

    Before you arrange finance for the hotel business, you need to know the costs. The biggest expense will be the conversion of the hotel.

    To this, you can add the operational costs for your first three months, all of your legal fees and permits, and your startup inventory. You can expect this to come in at just under $1 million USD.

    After this, you have miscellaneous costs added to the total such as CCTV, specialist equipment, and other items. This means that even a small hotel can be a huge investment and to secure it, you need a solid business plan.

    Ways of Hotel Financing

    The first option to get finance for a hotel business is to raise the funds yourself. This can come from borrowing from friends and family. This way, you have more leverage to agree better terms than you would with a professional lender.

    You could also consider raising the money yourself, either by saving or raising the capital against the value of your home. This does of course have many risks, as you will always need a place to live.

    However, for many people, the kind of capital needed for a hotel has to be financed by specialist hotel property financing. You should shop around for the best rates for your loan, to ensure you have the correct deal for your business. https://www.sbalenders.com/top-banks-hotel-sba-loans/ can help you check the market.

    Get a Solid Business Plan

    Securing these loans rests on you having a solid business plan. While you may have an advantage in opening a small to mid-sized hotel, you still need to work extremely hard to secure the finance. Almost half of all hotels close within the first five years, so you should make sure you speak with a professional who can help arrange your plan before consulting lenders.

    Find a Location

    One key element of your plan for hotel financing will be the location. Do a summary of tourism in the local area, including extensive market research, and add it to your business plan. This should help secure the financing you need and take you one step closer to opening a hotel.

    Get Ready to Open Your Hotel

    It is a big deal to decide to open your own business. Once you have a plan in place and have hotel financing set up, you are ready to get started.

    If you are creating a business, then we can help. With advice on finance and marketing, let us help your company grow in the coming year!