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Hospitality Industry Loans: Financing Options For Hospitality Companies

Hospitality Industry Funding

Creating the best possible customer experience is the number one goal for the Hospitality industry. To achieve this standard, the recent trends brought upon by technology have made it possible to engage the guest in self-efficient ways. Customer and employee interactions are shifting towards and being replaced with self-scanning and self-check transactions. Technology is advancing so much, that studies conducted have revealed that by 2033, there could be as many as 47% of modern day jobs claimed by automation. However, does this mean it is the end of customer service provided by actual people? Not, necessarily. Thus we are seeing how businesses are using technology in many ways to their advantage.

Quick-jump to the following sections:

A system that has been around for some time called, CRM (Customer Relationship Management) has undergone a makeover to mesh better with what people want today. Before, CRM was all about logging customer data and behaviors, but now with today’s tech-savvy marketplace customer retention and motivation and the use of smart data and social media engagement has become the priority. The CRM’s are making it easier for hotels, nightclubs, and bars to manage their administration. With this system, it offers companies more time as they no longer need to be concerned with bookings, table management, promoters or even marketing. Instead, the system takes these responsibilities and collects all the essential information into a desktop with mobile-friendly programming for the management team. Additionally, a network such as the CRM frees up times for your staff as it reduces administration work and allows for more customer friendly initiatives. Such as improving the customer experience by making it easy to wish them a happy birthday, remember a drink order or greet them by name.

Furthermore, so many businesses within the hospitality industry rely heavily on word of mouth or good reviews from loyal customers, making social media a natural marketing tool. It has been observed that reviews by consumers has dramatically influenced their spending habits and has been both a blessing and a curse for the industry. People regularly use social media to brag about their great experiences as well as share their displeasure with poor ones. As a result, it has created a way for businesses to gather feedback to implement appropriate changes to enhance their customer service. For example, social media has gone a step further with live video streaming that has allowed businesses to see how effective they are in real time; creating a new and exciting way for consumers to engage with where they are investing their money.

With new companies like Airbnb and VRBO, which allows users to book a room or even an entire house in the city of their choice, are giving businesses in the hospitality industry a run for their money. Thus to stay thriving, industries such as Hotels are improving the customers experience in several different ways. This can be seen with the elimination of front desk check-ins, mobile payments, and wireless technology. Some hotels that have adopted the no front-desk idea are giving guest the option to check-in via smartphone, making it more convenient and quicker to access their room. Further, with mobile payments, it offers consumers an efficient and easy way to pay to enable the industry to compete with the convenience provided by favorite companies mentioned before like Airbnb. As for wireless technology, more and more establishments in hospitality are offering free Wi-Fi that is paving the way for more elaborate advancements in wireless technology and a change not only for guest but also the staff. As with the roaming staff, there are devices now that can send information as voice, data, text or alarm from other colleagues, customers, computers, suppliers, and databases all at no extra cost other than the handsets themselves. There are also devices that allow you to monitor every angle of your establishment in real-time from any location known as IP-CCTV, while being as discreet as you choose. Hence, many wireless applications can save costs and increase your businesses efficiency that is worth having or upgrading too.

Lastly, these new trends in technology have made it possible for industries to conserve energy more than ever. For most hotels, in particular, energy is among the top three most considerable cost, so this is an attractive proposition to yield financial savings. Thus intelligent technologies are helping companies monitor and report on energy consumption. Furthermore, guest can contribute to saving energy by hospitality industries use of technology that gives guest instant control over water flow and temperature. The system IoT and big-data enable monitoring while creating usage and consumption statistics that help to optimize settings. Ultimately, what can be taken away from investing in technological advances within the hospitality industry is that it is an enabler. It helps us to communicate and work more efficiently, drive our businesses to greater heights, and with a strong presence of social media, it can help create stronger and longer lasting relationships with companies and customers alike.

Types of Hospitality Loans and Financing Options

When seeking a hospitality business loan, its important to match yourself with lenders that specialize in providing financing for the uses you’ll be using the funds for. Just as importantly, you’ll need to apply to lenders that specialize in the credit and cash-flow that your company exhibits. Below we’ll look at some of the financing options available to hospitality companies.

Hospitality Term Loan

This is the premiere financing product used by most small businesses that choose to borrow. Bank term loans offer the most affordable type of financing with the longest terms available. Additionally, a bank term lender usually charges the fewest fees of all the commercial financing companies. Bank term loans are used by hospitality companies for acquisitions, purchasing real estate, refinancing debt, working capital as well as just about any other commercial use.

Rates 5-15%
Terms 1-30 years
Funding Amounts $50,000-$5,000,000
Collateral Required
Fees Medium costs


Hospitality Line of Credit

A line of credit for a hospitality company or hotel industry is a flexible form of financing that allows a small business owner to have access to financing whenever they should need. Whereas a term loan requires getting preapproved, due diligence and closing before funds can be dispersed, a line of credit allows the small business to access and draw on money as they need without further approval.

Rates 6-15%
Terms 1-2 years
Funding Amounts $10,000-$500,000
Collateral Not be Required
Fees Medium costs


Hospitality SBA Loan

SBA funding is a great option for small businesses in the hospitality industry to obtain quality, bank-rate financing they wouldn’t have been able to access without participating in the Small Business Administration’s program. SBA lending works by having the Small Business Administration agree to cover lender’s losses that provide financing using the SBA enhancement program. By using this program, the lender is able to reduce their risk exposure, thus: increasing likelihood of approving the loan.

Rates 5-8%
Terms 3-25 years
Funding Amounts $50,000-$5,000,000
Collateral Required
Fees Medium costs


Asset Based Hospitality Loan

Not every hospitality company has the revenue and cash-flow to support more conventional forms of business financing. But if the hospitality company has assets on their balance sheets with decent equity, they can then use those assets as collateral to obtain an asset based loan or asset based line of credit. Usual forms of collateral include commercial real estate or accounts receivable.

Rates 10-25%
Terms 1-5 years
Funding Amounts $50,000-$500,000
Collateral Required
Fees Medium costs


Unsecured Hospitality Line of Credit

An unsecured line of credit is almost the exact opposite of an asset-based line of credit. Whereas an asset-based loan uses the company’s balance sheet as collateral, an unsecured loan does not use collateral as the basis for providing financing but, instead, relies solely on the business owner’s personal credit (which usually needs to be above 700).

Rates 0% APR for 12 months
Terms 1-2 years
Funding Amounts $10,000-$500,000
Collateral Not required
Fees Medium costs


ACH Hospitality Cash Advance

An ACH hospitality advance is the most common type of merchant advance used for working capital purposes. A merchant cash advance is the sale of future receivables, therefore, its not actually a loan but, instead a business-to-business transaction. This type of financing is perfect for hospitality companies with poor credit or who need financing very quickly.

Rates 1.10 – 1.50
Terms 3-18 months
Funding Amounts $10,000-$500,000
Collateral Not required
Fees Medium costs


Hospitality MCA Split

An MCA split is another form of merchant cash advance used by hospitality companies with poor credit or whom need financing very fast. The main difference between an ACH cash advance and a MCA split is the way they are repaid. An ACH advance is repaid by having a set amount transferred from their bank account to the funder’s account each business day. With a MCA split, instead of a set payment each business day, the merchant splits a percentage of their day’s credit card sales with the funder as form of repayment.

Factor rates 1.10 – 1.50
Terms 3-18 months
Funding Amounts $5,000-$250,000
Collateral Not required
Fees Low to High costs


Equipment Leasing

Sometimes hospitality companies need business equipment but don’t have the liquid funds to purchase the equipment outright, nor do they want to take out a loan to obtain the equipment. Another way to obtain the equipment is to choose to lease it instead of purchasing.

Factor rates 8-20%
Terms 1-10 years
Funding Amounts $5,000-$2,000,000
Collateral Required
Fees Low to High costs


As you can see there are plenty of financing options available to small business owners who run companies in the hospitality industry. If you’re looking for a hospitality loan, but feel you need help understanding your options to ensure you get the best rates and terms, please reach-out to one of our funding specialists, and we’ll help you navigate the process.

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About the author
Domonique Cox

Domonique is a Minnesota native that earned her bachelors from The University of Arizona with a degree in English and Film Studies. Though books and writing are not her only interest, you can find her engaging in nutritional sciences, environmentalism, vegan cuisine, filmmaking, old school dancing, tennis, running, sound engineering, and enjoying satirical dark comedies or listening to the poetic lyrics of Bob Dylan. She is now based in Los Angeles as a content writer for GUD Capital where she spends her spare time honing her writing and directing skills. 

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