Did you know that there are almost 55,000 hotels in the United States of America? Hotels are something that will always be needed by travelers as well as business people. It is a great way to start your own business but to buy a hotel, most people need hotel loans.
There is a lot to know when it comes to pursuing a hotel loan. You’ll need to know who gives hotel loans and how to get a hotel loan. You’ll also need to learn about what you’ll need to qualify for a hotel loan. This might seem a little overwhelming, but you shouldn’t worry.
The good news is that you’ve come to the right place to learn more about how hotel loans work, the different types of hotel loans, and which loans are best for you. Continue reading to learn more.
What Are Hotel Loans?
Hotel loans are loans that are meant to help people in the hospitality industry with running their business to the best degree. There are several different loan sizes and structures tailored towards helping with different objectives. There are also hotel loans designed to help smaller hotels while others are tailored to help large hotels.
It is important to know which hotel loan is best for you if you decided to finance a hotel.
Different Types of Business Loans for Hotels
There are a plethora of options when it comes to hotel loans. You must know each type of common hotel loan and the purpose that it serves. Here is a closer look at the most common types and the benefits of each.
Standard Hotel Loans
Standard hotel loans are one of the most popular types of hotel loans on the market today. These loans come with a fixed loan term as well as a field interest rate. If you choose to take out this type of loan then you’ll make monthly payments to the lender to cover the principal of your hotel loan as well as the accumulation of interest.
This type of hotel loan is common because it is used for hotel improvements like renovations and hiring extra hotel staff. It is also great for purchasing and financing new or upgraded hotel equipment.
Mezzanine financing works by using a combination of your debt and equity in your hotel. This type of hotel loan works by the lender giving you a loan that you’ll need to repay with interest. They also provide you with the money you need. The lender then gets shares in your hotel in exchange.
This type of hotel financing is one of the most flexible options available when it comes to hotel loans. This is especially true when compared to the standard hotel loan. It is a great option because the lenders will offer more cash than banks for your hotel loan needs. The downside to this is that the lender also offers a higher interest rate on the capital they loan you.
If you’re the owner of an existing hotel that has good cash flow then this is a good hotel loan option for your needs. It is especially valuable for hotels that want to expand.
Hotel Bridging Loans
Another common and popular loan type for hotels is the hotel bridging loan. This loan is designed to help you secure financing to bridge the money gap separating you from buying a new asset for your hotel. This could be a new building or an entirely new property.
It also helps you by bridging the gap to a more permanent type of financing for this new asset, like a mortgage. This is a great option for a hotel that wants to expand but needs a little extra cash to make it happen.
If you’re an aspiring hotel owner that needs to build their hotel from the ground up then a permanent loan is the best type of hotel loan to consider. It operates like a hotel construction loan when you first start building and then converts into a mortgage after construction is completed.
This has the massive benefit of preventing the need to apply for two separate loans. This is especially convenient because most times you’ll need to apply to separate lenders to get the different loans you’ll need.
Another common type of hotel loan is the preferred equity loan. This type of loan sees lenders extend credit to the owner of the hotel but this comes at a cost. The hotel gets this credit in exchange for preferred shares of their hotel. This type of shareholder has a higher priority than normal shareholders in your hotel if your hotel goes bankrupt.
This type of loan is most often used as a way to boost cash on top of a traditional hotel loan.
SBA Hotel Financing
SBA hotel financing loans are government-backed loans that are designed to help small businesses. This type of financing guarantees a large percentage of the loan you take out for the lender if your hotel goes under.
This is beneficial because it eliminates most of the risk that the lender experiences when deciding to approve your loan request. It is also great because it goes a long way towards lowering interest rates and making your monthly payments much more affordable.
The drawback to SBA hotel financing loans is that they tend to be difficult to get qualifications for. This is especially true if your hotel is going through some hardships financially. Visit this site to learn more about getting a hotel loan.
Get Your Hotel Loans Today
Hotel loans are a great way to build a hotel from the ground up or to add renovations and features to an existing hotel. To secure the funds necessary for that, you need to know about the different ways to finance a hotel and the benefits of each. Standard hotel loans are great for getting extra money to handle renovations or hire more staff.
Hotel bridging loans are another great option for getting extra money to close the gap and purchase new assets that your hotel needs. If you’re starting a hotel from the ground up then a permanent loan is the best choice for you.
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