What is Hotel Finance?

March 5, 2024
Jamie Davies

Your hotel doesn't just need customers in order to prosper - it also needs working capital. Without much money in the bank, it's hard to make the investments your business needs in order to stay attractive to future guests.

Most businesses don't enjoy a massive reserve of working capital. Indeed, why would they want to? Cash that's sitting idle isn't contributing to growth and future success. The more cash you can put to work, earning a return, the better it is for your business.

This does mean that when you need money for a specific project, such as the purchase of a significant asset or major upgrade of some kind, you may need to access some form of hotel finance. That is, a loan or similar financial arrangement that's specifically designed for the hospitality trade.

Reasons for taking out hotel finance

Every industry has its own unique opportunities - and challenges. Hospitality, and hotels in particular, face a unique combination of issues. Also, that combination will vary depending on the location of the hotel and its target market. A conference hotel in London is quite different from one in a resort location elsewhere.

The impact of the Covid-19 pandemic on the hospitality sector can't be ignored. This has multiple points of impact - unpredictability around customer numbers, staffing issues and supply chain disruption. All of those have put an additional strain on working capital.

Reasons why you may be seeking finance for your hotel company include:

  • Purchase of another property or business.
  • Major development or renovation projects.
  • Fund a marketing campaign.
  • Upgrade your information technology systems.
  • Fund a gap in working capital.

Sometimes you're seeking funds to invest in a significant project that will move the business forward - new premises, a new look, reaching out to a new market.

Other times your need for funds is less exciting but no less important - you have staff and suppliers to pay, but the cash for that isn't available right now.

Whatever the reason, your need is the same. Providers of hotel finance have experience of working with business owners with many different reasons for wanting to borrow. Their expert knowledge and understanding of the industry helps them to shape finance products well-suited to the hospitality sector.

Types of hotel finance available

Your reasons for seeking hotel finance, along with how much you're looking for and what repayment period you prefer, will make a difference to which funding mechanism is most appropriate.

Options for hotel finance typically include:

  • Fixed term loans, both secured and unsecured.
  • Refinancing of existing debt.
  • Merchant cash advance.
  • Commercial mortgages.
  • Overdrafts.

Unsecured loans can be anything between £10k and £500k. A personal guarantee from a director may be required. An unsecured loan can be arranged in just a few days, depending on the circumstances.

Secured loans can be from £25k upwards, potentially into the millions. Secured loans take longer to arrange, because of all the checks and documentation required around the security.

Other forms of finance may be appropriate, such as short-term loans, repayable over just a few months.

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Benefits of hotel finance

There are a number of advantages to be had from working with finance providers with extensive experience of the hotel industry.

They understand the specific challenges associated with management of a hospitality venue, such as variations in revenue due to seasonality of trade.

A major benefit of having the right finance in place is that it provides the basis for growth. The funds can give you the budget to grow your business into more lucrative markets, through improving the quality of service and presentation of your venue. The UK hospitality industry offers huge opportunities, even with the recent disruption of the global pandemic.

While many lenders prefer to work with businesses that have a strong credit rating, it is often possible to secure a loan without having it. This usually comes down to having a strong business plan, a current positive credit situation and approaching the right providers.

Am I eligible for hotel finance?

Every provider of business finance has their own criteria for deciding who they will lend to, how much and on what terms.

The basics they usually look for include:

  • Minimum turnover of £100k.
  • At least 2 years of trading history.
  • No County Court Judgements.
  • Positive credit history.
  • Business is registered in the UK.

It helps if one of the directors is a homeowner, and that the business boasts a positive balance sheet.

However, if you don't meet some of these criteria there are other funding options available. We help business owners navigate through issues such as a poor credit record or needing finance in a hurry because of unexpected changes in circumstances.

How we help business owners secure hotel finance

The team at JD Capital Finance is committed to helping hospitality entrepreneurs move their business ideas and plans forward, through having access to the right finance.

Our role, as a finance broker, is to be your funding expert as you prepare to make investment in your future. Because taking on finance is an investment - you're raising money to put to work now, in order to generate future revenue and profits.

As brokers, we work with around 250 different finance providers, each with their own variety of lending products. Using our knowledge and experience, we match you with the provider we believe will be the best fit for your circumstances.

Through the entire process, you work with a designated member of our specialist finance team, ensuring continuity of communication. They stay alongside you, every step of the way, until the funds are in your bank account.

If you're in the hotel or hospitality industry and would like to know how much you could borrow, and on what terms, we can help you find out, fast. Get in touch with one of our team today.

Jamie Davies
Managing Director

As a founder of multiple businesses, Jamie believes that mindset, discipline and ambition are key drivers for success, both for his businesses and for his clients. 

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Disclaimer: Spark Finance Ltd (Registered office - 18 John Stow House, London, England, EC3A 7JB, Registered Number 10128297) helps UK firms access business finance. Spark is a credit broker, not a lender. Any quotes provided are for information purposes only and subject to status and separate lender terms and conditions. Applicants must be aged 18 and over.  Guarantees and Indemnities may be required.  Spark Finance may receive commission from lenders  which may vary depending on the lender, product, or other permissible factors. The nature of any commission model will be confirmed to you before you proceed.

Spark Finance Ltd is authorised and regulated by the Financial Conduct Authority in the UK (FRN 958123).