Five Things Entrepreneurs Should Know About Hotel Financing

Hotel financing is a niche area that happens to be quite mature at the moment. As such, there’s a lot of money available on the market in which to invest. If your dream is to be a hotel entrepreneur but you need help with financing, you can definitely make it a reality if you’re smart about it.

Must Understand the Lending Process

The hotel industry presents some interesting opportunities for entrepreneurs eager to make their mark in business. The downside, however, is that hotels are expensive and the initial investment prevents many from being able to enter the field. There is help out there but you have to have a thorough understanding of the criteria involved and, of course, then be able to meet it.

Find a Niche

These days, successful hotels realize that to stay competitive they need to occupy a particular niche in the marketplace. So you will need to have a niche as well. Will your hotel cater to tourists or business clients? If it targets tourists, is it comparable to other tourist hotels in the area? Your answers to these kinds of questions will determine your ability to get financed.

Know the Rating System

Hotel financing lenders rely on a ratings system to differentiate hotel types. For instance, first-tier hotels are newer establishments and usually carry a four or five star rating. Second-tier hotels fall in the middle of the rating system and typically appeal to middle class customers. The third and fourth-tier hotels are older without many amenities. To a lender, a hotel rated in any tier can be a good credit risk as long as the owner has factored in realistic projected cost earnings into the business plan.

Decide if You Need Help From Other Investors

Lenders are generally willing to lend up to 70 percent of the value of the business, leaving the business owner to come up with the additional 30 percent. It may not sound like much but that can still be a significant amount. If that’s the case for you, explore bringing investors on board to help with the down payment.

Must Be Able to Repay

The most important factor for a lender is the entrepreneur’s ability to repay the loan within a particular period of time. As such, you will need to be able to prove your ability to repay it based on realistic occupancy projections.

Stay informed on all of the latest information about hotel financing by reading online hotel law websites. They are one of the best resources out there for entrepreneurs interesting in financing a