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Hotel Loans: Mortgages & Capital For Hotels and Motels

Like any other industry in the United States, the hotel industry took a big hit during the 2008 financial crisis. Americans did not have expendable income, meaning they did not have the money to splurge on any trips that would prompt the need of spending on a hotel. Outside of people traveling for business, the hotel industry did not see much revenue being generated. Luckily the hotel industry has seen a drastic increase in profitability since 2011 as the economy improved and domestic and international travel rates increased; the hotel industry is also expecting to continue to increase into 2021. As of 2016, the global hotel industry reached $550 billion, with the United States seeing impressive growth in the three key performance metrics. The United States hotel industry’s occupancy was at 71.1 percent, the average daily rate (ADR) rose 3.4 percent to $127.19, and the revenue per room (RevPAR) grew 3.3 percent to $90.48. A huge part of these positive revenue growths is due to the current election, allowing Philadelphia’s hotels to have the largest impact in the third quarter because of the Democratic National Convention. Phoenix, Los Angeles, Long Beach, and Nashville also saw year-over-year RevPAR growth.

During 2014 there were 3,645 U.S. hotel construction projects in the pipeline, representing more than 460,000 hotel rooms — the highest level in six years, and five consecutive quarters of double-digit growth (year-over-year).At the same time, world hotel prices increased for the fifth year in a row, with Americans paying a hotel price of about $137 per night for hotel rooms in the U.S..The bright outlook in the hotel industry has more hotel investment into buying, building and converting hotels/motels in this 2015, than at any point since the financial crisis of 2008.

According to a report put out by the American Hotel and Lodging Association, the hotel industry is essential in growing today’s economy, as well as being a huge influence in creating jobs throughout the United States. More jobs and higher wages are constantly increasing in the hotel industry, more so than any other industry! The hotel industry added more than 30,000 new hotel jobs and 100,000 new travel-related jobs; this means that there has been over $12 billion in travel related wages and salaries in the United States. The hotel industry is also vital in our economy today because tourism helps boost our economy, which is mainly what hotels cater to – tourism generates $927.9 billion in sales. While all of these statistics are great news for all hotel businesses, there are always needs for financing options, especially with many of the trends that are revolutionizing the hotel industry.

Trends that Influence the Need for Hotel Financing

  • Mobile devices and new apps are in high demand for the hotel industry. In today’s society, consumers want personalized guest services more than ever, which is only attainable through the advances of technology. Almost all business travelers and tourists believe that being able to access information, book hotels, and have quality service from their smartphone is essential when traveling, which has resulted in more than 50 percent of hotel bookings taking place online in 2016. However, affording the upfront costs of creating mobile device and application platforms is not easy or cheap, especially if you want a quality app created. Reviewing the different financing options for your hotel business below can be helpful when keep up with the new technological trends.
  • Dynamic marketing is another technological trend that is dominating the hotel industry right now. Dynamic marketing, also known as omnichannels, for the hotel industry involves displaying real time pricing, room availability, and hotel information across a variety of online marketing channels. Learning how to use the omnichannel options that are available to hotel businesses, as well as knowing how to use them effectively and efficiently, is difficult. Reviewing the hotel financing options available to your hotel business is vital in staying ahead of the competition in this diverse industry.
  • Social media engagement is vital in every industry today, and those hotel businesses that are not staying on top of their social media will notice a significant decrease in profitability in the next few years. Looking into different hotel loan and financing options can be helpful when looking into different marketing agencies or specialists for your hotel social media.
  • Payroll and emergency situations are unavoidable in the hotel industry. When considering different financing options, being aware of how merchant cash advances for hotels work can be useful as it offers a quick approval process in conjunction with access to the funding immediately for those emergency situations.
  • Expansion or renovation of your hotel business could be a possibility in the near future with these positive statistics and trends emerging, however finding the up front capital needed to finance a hotel expansion or renovation is not easy. Reviewing the different hotel financing options for your business could help.

Types of Hotel Loans

Types Rates Terms Funding
Bank 6-10% 3-7 years 14-30 days
SBA 6-10% 3-7 years 10-30 days
Line of Credit 5-15% 1 – 3 years 7-30 days
Alternative 6-25% 1-5 years 5-7 days
 Cash Advance 1.16-1.55 3-24 months 1-3 days
Invoice Finance 1-2% weekly 1 – 90 days 1-3 days

Hotel Bank Loans

Traditional bank hotel financing, such as term loans and lines of credit, for hotels is always the first option a hotel business should look into when needing financing. Traditional bank loans typically offer the lowest rates (both fixed and adjustable) for hotel businesses, as well as being the most favorable repayment terms of all hotel lenders. While traditional bank hotel loans are the best option, not every hotel business has the time to wait for the lengthy process of  traditional bank hotel funding. Another struggle some hotel business owners face is the lack of personal and/or business credit to obtain traditional bank hotel financing. While traditional bank-rate hotel loans are the ideal option, there are also other forms of financing that a hotel owner can obtain.

  • Rates: 5-10%
  • Terms: 1-25 years

SBA Hotel Loans

SBA hotel loans are always a great option for small hotel businesses if that hotel owner cannot obtain a traditional bank hotel loan. SBA hotel financing is more easily obtained by a small business hotel owner because the Small Business Administration agrees to back a portion of the hotel financing in case the hotel owner defaults. For small hotel businesses, the SBA 7(a) program and the SBA 504 program are always an option. The SBA 7(a) program provides hotel owners up to $5 million in financing with a maximum hotel loan-to-value of 85 percent. The SBA 504 program allows hotel businesses to buy land or existing hotels, financing of hotel land improvements, the construction of new hotels, or modernizing and renovating existing hotels. However, not every hotel business qualifies for an SBA loan because it does require decent credit and can take a long time to obtain funding.

  • Rates: 6-8%
  • Terms: 3-25 years

Hotel Alternative Business Loans

For hotel businesses that are having difficulty obtaining traditional bank hotel loans and SBA hotel financing, alternative hotel loans may be the best option. Alternative hotel loans are also called mid prime business loans. With mid prime hotel business funding, hotel owners can still have a good rate and term, and also receive approval and funding within a week. Mid prime hotel loans still require a hotel business to have decent credit, but are more flexible than traditional bank hotel financing.

  • Rates: 8-25%
  • Terms: 1-5 years

Asset Based Hotel Loans

For hotel owners that own their commercial or personal property, and in need of sensible working capital, an option could be to use your real estate’s equity as collateral for finacing. Asset based lenders are willing to offer up to 75% of the property’s equity as a term loan or line of credit.

  • Rates: 10-20%
  • Terms: 1-5 years

Hotel Merchant Cash Advance

Hotel cash advances are a good option of financing for hotel business owners who need capital quickly, as well as hotel business owners who do not have good credit. A merchant cash advance for a hotel is the sale of the hotel’s future bank account deposits in return for an up front lump sum of financing. This is not a true loan, but still has similar benefits for hotel businesses because there is a much higher approval rate for merchant cash advances than a traditional bank hotel loan or SBA hotel loan.

  • Factor rates: 1.16-1.50
  • Terms: 4-24 months

Speak to a Financing Expert

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Who We Are

GUD Capital is a nationally recognized leader in the financing industry for providing the best business lending solutions available to small and mid-sized businesses. We leverage our network of 4,000 competing commercial lenders to provide your business the largest selection of commercial financing options.

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