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Running a hotel is a complex and sometimes challenging job. You may be looking to give your venue a facelift, or perhaps to buy an existing hotel. You may be looking into starting a new establishment. This is where a hotel loan can come in. With it, you can finance a range of business expenses, including the purchase of new premises or equipment.
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An unsecured business loan with fast application and funding turnaround. Interest rates determined by business circumstances and loan requirements.
A hotel loan is essentially business finance. The word 'hotel' is used to broadly refer to businesses in the hospitality industry, such as pubs, motels and venues for accommodation. The loan can be used to buy an existing hotel, start your own or to refurbish your current venue. There are a number of business loans you can apply for, depending on your needs. As with other business loans, you'll have to make regular repayments inclusive of interest up to a stated loan term.
You can use a business loan to cover a number of upfront and ongoing expenses. These include:
| Loan type | About | Pros | Cons |
|---|---|---|---|
| Secured business loan | Requires an asset as security. This can be residential or commercial property. How much you can borrow will depend on the type of property offered as security. Commercial properties generally have a lower LVR than residential properties. | - Lower interest rate - Higher borrowing amounts - Can be used for any or multiple business purposes - Longer loan terms, sometimes up to 30 years | - You risk losing your asset if you default - Longer processing times as there's more documentation involved |
| Commercial property loan | Specifically designed in order to purchase commercial property. They generally come with higher interest rates than secured loans. | - You can fund the purchase of your hotel - Wide range of options available, including mezzanine finance. - Loans are specifically designed for the purchase of business property | - Higher interest rates than secured loans - You may need a large deposit, as the maximum LVR may be 70% or less. |
| Unsecured business loan | You won't need an asset to secure this loan, but borrowing amounts are typically lower. Interest rates are higher. This type of loan is useful for a small to medium sized cash injection. | - You don't need to offer any assets (and risk personal property) - Fast processing time as less documentation is required. | - Lower borrowing amounts - Your credit score will play a greater role in your ability to get credit - Interest rates for unsecured loans are higher |
| Equipment finance | You can get essential business vehicles and equipment with this type of loan. You can use the equipment as security for the loan. There are a number of equipment loans to choose from, depending on the needs of your business. | - Large variety of loans, including commercial hire purchase, chattel mortgage and operating leases. This allows you to select a loan that best suits your business's needs. - You can use the business equipment as security and get lower rates. - Own or lease business assets without affecting your cash flow | - Can be quite complicated to navigate and figure out which type of equipment loan is best for your business. - Fees and interest charges will increase the cost of the equipment. You'll be paying more than what the equipment is worth. - If you're purchasing equipment, you will be paying for a steadily depreciating asset. |
| Business line of credit | This is a revolving line of credit, allowing you to borrow funds as and when you want it. You only pay interest on what you borrow and not the entire credit limit granted to you. This is useful if you don't want funding in a lump sum. This type of loan can be secured or unsecured. | - Withdraw cash as and when your business needs it - You only pay interest on what you borrow - Useful for short-term cash flow shortages | - Not a long term finance solution - Can't provide the funds you need for large business purchases, such as premises or equipment - Interest rates are generally higher than for standard business loans. |
| Business overdraft | Overdrafts are attached to your business transaction account. It can be either unsecured, or secured for higher amounts. It allows your business to draw beyond what you have in your account, up to the approved limit. You pay interest on what you borrow. | - Convenient if you're worried you'll run short | - You'll have to exhaust funds in your account to be able to access this facility - Interest rates are higher than for standard business loans. |
The best way to figure out which type of finance is right for you is to ask yourself the following questions:
If you're in the market for hotel loans, it's easy to feel overwhelmed by the range of finance options available. To help make it easier, keep the following in mind when comparing:
Are you dreaming of opening your own hotel or pub? Starting a business from scratch is a huge undertaking with many traps and pitfalls along the way. It can be an expensive exercise. You may be surprised to discover just how quickly the costs can add up. With that in mind, here are some expense you'll have to account for when doing your calculations:
A comprehensive business plan can help you develop a clearer picture of your financial situation and ongoing requirements. It can allow you to budget for expenses that may arise in the future.
You may decide to buy an existing hotel instead of starting from scratch. 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.
But there are several expenses you'll need to consider when working out your financial requirements. These include:
Keep in mind that there are other running costs you'll have to consider for the daily management of your business. You'll need to have enough working capital and pay all the necessary insurance premiums, staff wages and other expenses.
Preparing a comprehensive application can increase your chances of getting approval. But there are a few things that could set you apart. These include:
🤔 Work out what type of finance you need, how much you need to borrow and what you can afford.
🔎 Start comparing lenders and loan products. Don't forget to compare interest rates, fees and eligibility criteria. You can use Finder's comparison table to help you.
✅ Select a lender. Click "Go to site" to be directed to the lender's page, or "More info" if you want to read about the lender.
🖨️ Organise and prepare the required documentation. This will make the application process easier.
📱 Apply. Most lenders have their applications online.
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I own a country hotel. I need to do repairs and pay back loan to bank.
Hi Brett,
Thank you for getting in touch with finder.
On this page, you may choose the lender that would help you further on repairing your hotel. You’ll see a table with list of lenders that you may apply for a business loan with. After you compare your options and decide on which lender to apply a loan with, please click n the Go to site/Enquire now button to be redirected to their official page and start your online application.
Please make sure that you’ve read the relevant T&Cs or PDS of the loan products before making a decision and consider whether the product is right for you or contact the lender directly for further info on your business loan application.
I hope this helps.
Please feel free to reach out to us if you have any other enquiries.
Thank you and have a wonderful day!
Cheers,
Jeni