Direct Lender: Tips for Obtaining Hospitality Financing

Hospitality industry owners have a unique need for continual financing, as hotels and motels require constant upkeep and maintenance. With a sub-par commercial economy, more baby boomers are finding fantastic real estate deals on hospitality foreclosures, albeit it motels, hotels or bed and breakfasts. While these ideas are superb for long-term retirement plans, financing can be difficult to obtain.

The leading reason most hospitality real estate ventures are in need of funding is for standard renovations and maintenance. Whether it is a large flagship, franchise or a small boutique hotel, the need to constantly update both the exterior and interior every two to three years is vital to staying in business.

The hospitality industry heavily relies on word of mouth and online reviews. Negative reviews can have a severe impact on potential customers’ opinions, causing them to book other overnight accommodations. The importance of upkeep cannot be stressed enough in this industry, which relies not only on regulars, but people simply staying one night.

There are several questions that hospitality owners need to consider when looking at the right type of loan to meet their needs.

• How often is it necessary to update bathrooms, furniture, television sets, the lobby, recreation areas, etc.?
• When the property improvement plan was created, how often did it require updates? Does the plan require repaving entrances or fixing the exterior facades?
• What are required occupancy rates and how will a renovation affect daily cash flows?
• Is refinancing outstanding debts an option?

There are many other reasons why hotels or motels may take out loans, including the following:

• Adding New Services – Adding a restaurant or conference center may help improve cash flow over time, but also requires up front capital for expenses.
• Expansion – Whether it is expanding a current location or purchasing a second location, a hospitality loan can help with these types of improvements.
• Efficiency – The millennial generation is rapidly becoming the core customers of the hospitality industry. This means that more hotels and motels are booked online and customers want free WiFi during their stays.
• Marketing Managers – A marketing manager can help maintain Yelp and Trip Advisor hotel recommendations. A manager alerts management about negative reviews, monitors all social media channels and helps run promotional events, such as GroupOn coupons, etc.

There are many options available for hospitality loans.

• Merchant Cash Advance – This involves lenders collecting fixed daily percentages from hotel’s credit card sales until the loan is paid in full.
• Direct Lender or Hard Money Lender – A direct lender can work with hotels to customize a loan that includes a specific amount, interest percentage and payback terms.