Business loans for hotels

Family checking in to hotel

Find the right finance solution to help you buy, upgrade or manage a hotel.

Running a hotel is a complex and sometimes challenging job. Regardless of whether you’re buying an existing hotel, starting a new establishment or looking to give your venue a much-needed makeover, you’ll probably need to borrow money to turn the vision you have for your business into reality.

The good news is that there’s a huge range of finance options available to suit an equally diverse variety of hotel business needs, so let’s take a closer look at how a business loan could help you.

How can a business loan help me?

Whether you’re starting a new hotel or taking over the reins of an established venue, there are plenty of upfront and ongoing expenses you will need to take into account. These expenses include the following:

  • Purchasing or leasing the hotel property
  • Renovating or refurbishing your venue
  • Purchasing new furniture
  • Updating signage
  • Buying new catering equipment for the hotel kitchen
  • Updating sound and lighting equipment for live music
  • Covering liquor licensing and gaming approval costs
  • Purchasing poker machines
  • Paying staff salaries
  • Advertising and marketing promotions
  • Insurance premiums

This list is just a short sample of some of the costs you’ll need to consider when buying and running a pub or hotel. If you need help with any of the above expenses, there are business finance options available to suit your needs. Read on for more details regarding the loans available and the benefits they can offer your business.

Business loans you can compare today

Rates last updated February 20th, 2018
Name Product Min Loan Amount Max. Loan Amount Loan Term Application Fee Product Description
Prospa Business Loan
$5,000
$250,000
0.25 to 2 years
$0
Apply for up to $250,000 and receive your approved funds within one business day. Note: Businesses must have a turnover of more than $5,000 per month and be able to demonstrate 6 months of trading history.
NAB QuickBiz Loan
$5,000
$100,000
1 to 3 years
$0
An unsecured business loan from $5,000 that can be processed in 1 business day. Businesses that apply and are approved before 30 April 2018 are eligible for a discounted interest rate of 12.95% p.a.
Moula Business Loan
$5,000
$250,000
0.5 to 1 years
$0
Small business loans of up to $250,000 approved and funded within 24 hours.
Transparent fees and rates. Note: Business must have been operating for at least 12 months and have monthly sales of at least $5,000.
Spotcap Loans
$10,000
$400,000
2 years
$0
Take advantage of a fixed interest rate and no upfront fees with this business loan, available up to $400,000. Note: Business must have been operating for at least 18 months and have turnover over $200,000.
Sail Unsecured Business Loan
$5,000
$100,000
1 year
2.5% origination fee
Apply for up to $5,000 even if you have bad credit. Note: Business must have been operating for at least 6 months and have turnover over $50,000.
OnDeck Business Loans
$10,000
$150,000
0.5 to 2 years
$0 (2.5% origination fee)
Apply online for up to $150,000 with OnDeck and receive approved funds in one business day.
businessloans.com.au Flexible Business Loan
$5,000
$500,000
0.5 to 1 years
1.5% Initial draw down fee
A 100% online business loan with amounts available from $5,000. Flexible eligibility criteria and transparent rates and fees.

Compare up to 4 providers

Types of loans to consider

Which loan is the right choice for your hotel? Check out the table below for a detailed guide to all of the finance options available:

Loan typeLoan amountProsCons
Commercial property loanGenerally up to 60-65% of the purchase price
  • Provides the funding you need to buy a hotel
  • Terms vary depending on whether you choose a freehold or leasehold arrangement
  • Wide range of loans available
  • You will typically need to provide a detailed business plan to qualify for financing
  • You will most likely borrow a large amount of money, which increases your risk
  • Lenders class hotels as “specialised” commercial properties, which means you can only access a reduced LVR when compared to other commercial property loans
Equipment financeThe cost of the equipment you need to purchase
  • Provides the funds you need to purchase expensive equipment
  • The equipment you buy acts as collateral for the loan
  • Wide range of finance options to choose from
  • Flexible repayment schedules can be tailored to suit your business
  • Fixed and variable rates available
  • Fees and interest charges increase costs
  • Can be difficult to determine which option is the best fit for your business
Business line of credit$10,000 to $100,000,000
  • Access a line of credit whenever you need funds to cover business costs
  • Can help you overcome short-term cash-flow shortages
  • Only pay interest on the money you borrow
  • Borrowing a smaller amount means reduced risk
  • You can negotiate fixed or ongoing terms
  • Not a long-term financing solution and can’t provide the funds you need to purchase a business
  • Interest charged monthly
  • Fees apply
  • You’ll need a good credit history to qualify for a line of credit
Business overdraft$10,000 to $100,000,000
  • Allows you to overdraw on your business bank account up to a limit that has been agreed upon with your bank
  • Very convenient if available on your existing business bank account
  • Handy to help you manage cash flow from day to day
  • Can be secured or unsecured
  • Flexible repayment schedule
  • Interest usually charged on a monthly basis
  • Attracts higher fees than some other loan options
  • Need to have a business bank account in place
Business term loan$5,000 to $500,000
  • Borrow the funds you need to pay for purchases and manage your business
  • Repay your debt over a fixed period
  • Security and consistency of regular repayments
  • Fixed and variable interest rates available
  • Wide choice of loans from an extensive range of lenders
  • Terms of 15 years or more available
  • The more you borrow, the higher the level of risk
  • Most loans require security
  • Doesn’t offer the same flexibility as other options
Unsecured business loan$1,000 to $250,000
  • Fast access to cash
  • Easy application process
  • No security required
  • Handy to help manage short-term cash-flow problems
  • Attracts higher fees and interest rates than other loan options
  • Short repayment terms
  • High level of risk involved if you fall behind on repayments

Which of the above hotel business loans is right for you? That depends on the following factors:

  • Why you need finance. Are you buying a hotel, purchasing new equipment, looking for a way to manage cash flow or borrowing for some other reason? This will influence the loans available to you.
  • Your assets. Do you have valuable assets you can offer as security for the loan? If so, this will increase your borrowing power and also broaden the range of products you can access.
  • Your credit history. It’s much easier for borrowers with good credit history to find financing than it is for borrowers with imperfect credit histories.

Expenses to consider when opening a hotel

Are you dreaming of opening your own hotel or pub? If so, remember that starting any kind of new business from scratch is a huge undertaking and one with many traps and pitfalls along the way. It can also be an expensive exercise, and you may be surprised to discover just how quickly all the separate costs involved can add up to a substantial amount.

With this in mind, make sure to include the following expenses in your calculations when planning to open a new hotel or pub:

  • Buying or leasing office space
  • Loan fees and interest charges attached to your commercial property loan
  • Fitting out the space and finalising interior decor
  • External works and signage costs
  • Furniture (if you offer accommodation at your establishment, this will include beds and bedding, bedside tables, coffee tables, TVs, artwork etc. If you’re running a pub, this will include lounges, chairs, stools, tables, artwork and the like).
  • Buying catering equipment for the hotel kitchen
  • Buying any sound, lighting and IT supplies needed to run the business
  • Purchasing gaming machines
  • Hiring staff and paying their wages
  • Marketing and advertising costs to spread the word about your new business
  • Web design expenses
  • Insurance cover
  • Licensing costs, not only for liquor and gaming licenses, but also for food safety and accommodation permits

This is why it’s a great idea to develop a comprehensive business plan for your new hotel. This will help you develop a clearer picture of your financial situation and ongoing requirements, allowing you to budget for all potential future expenses that may arise.

Expenses to consider when purchasing an existing hotel

If starting a new business from scratch sounds like a daunting proposition, you may decide that you’re better off purchasing an existing hotel. After all, if you can find an affordable property in a good location that has a solid customer base, a lot of the hard work will have already been done for you.

However, there are still several expenses you’ll need to consider when working out your financial requirements, including the following:

  • Purchasing costs depend on whether you are buying the business and leasing the premises or buying both the business and the premises
  • Interest charges and other loan fees
  • Renovation costs (both interior and exterior) if you want to give the hotel a new look
  • Upgrades to furniture and furnishings
  • Upgrades to other equipment, for example kitchen appliances or sound and lighting equipment
  • Marketing and advertising costs to promote the fact that the hotel is under new management
  • Any relevant licensing costs

Then there are the other running costs you’ll need to consider to effectively manage your business from day to day. These include having enough working capital to manage cash flow, paying all the necessary insurance premiums, paying staff wages and generally keeping your business as clean, inviting and up to date as possible.

How to compare business loans for hotels

If you’re in the market for a hotel business loan, it’s easy to feel overwhelmed by the sheer range of finance options available and their many different features. To help make it easier to choose the right loan, keep the following factors in mind when weighing up your options:

  • The type of loan. The right finance option for you will vary greatly depending on why you need to borrow money. So before you start comparing loan options, make sure you know which type of loan is right for you. This is where expert advice from a mortgage broker can be hugely beneficial.
  • The interest rate. Interest rates have a huge bearing on how much a loan will cost you in total over the entire term. Shop around to see which lender offers the lowest rate, but remember that there may also be high loan fees attached. Many finance options are also available with fixed or variable interest rates, so remember to only compare fixed-rate loans with other fixed-rate loans and variable-rate loans with other variable-rate loans.
  • Loan fees. It’s easy to be sucked in by a great interest rate and neglect to take any loan fees into account. Read all the fine print closely to make sure you’re aware of all the fees and charges that apply. Remember to look not only for upfront and ongoing fees, but also for any penalties if you miss a repayment.
  • Loan terms. How long will you have to repay the funds you borrow? If you’re considering a short-term loan, will you be able to afford the repayment amounts? On the flipside, are you aware of just how much extra accepting a longer loan term will cost?
  • Repayment schedule and amount. Next, take a look at the repayment schedule the lender offers – can you tailor it to suit the unique income and expense requirements of your business? You should also consider how much the regular repayment amount will be – is it a figure you can reasonably afford to repay every week, fortnight or month?
  • Risks attached to the loan. Every business finance option, no matter how big or small, comes with its share of risks and downsides. For example, you may need to offer an asset as security for one loan, or you might need to accept higher loan fees on another. Make sure you read the full terms and conditions before applying.
  • Get expert help. We touched on this point above but it’s worth mentioning again. Finding finance for any type of business is tricky and often confusing, so it’s worth engaging an experienced mortgage broker to help you assess all your options and choose the best one.

How to maximise your chances of approval

Preparing a comprehensive application that satisfies all the relevant criteria is the best way to increase the chances of being approved for a loan. Of course, there are a few other things that will help the lender view your application in a more positive light:

  • Get experience. Managing a pub or hotel is a dream for many Australians, but new venue owners are often unaware of just how complicated running a business can be. Being able to call upon experience in the hospitality industry will help make the day-to-day running of your new business easier and will also ensure that the lender views you as less of a risk.
  • Develop a business plan. Many lenders will request a comprehensive business plan when you apply for financing for a hotel. This requires you to outline a realistic plan for your hotel and how you will make a profit. It’s essential that you provide detailed information and projections to help the lender make an informed decision about whether or not to offer you a loan.
  • Get into the nitty gritty. The lender will want a full picture of the business’s financials before approving a loan, especially if you’re buying an existing hotel. Provide detailed information about the hotel’s current financial performance, including tax returns, a statement of profit and loss and a balance sheet, to increase your chances of approval.
  • Offer an asset as security. If you’re willing to offer an asset as collateral for your loan, this can significantly increase your borrowing power.

Frequently asked questions about business loans for hotels

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