Bridging Finance For Hotels

Investing in a hotel, whether you’re purchasing a new one or renovating an existing one, can result in a lengthy finance process while navigating a competitive market. If you need to raise capital quickly, a hotel bridging loan might be the answer.

This kind of short-term financing works very differently from traditional borrowing. Here, we outline what you’ll need to know about these quick-fix loans and how to apply for one.

Can you get a bridging loan for a hotel?

Yes, it’s possible, and they are often an attractive method of financing because of their primary benefits: funds are released quickly, and the criteria for qualifying for one are placed at the discretion of specialist lenders because they’re unregulated loans.

This means the strict regulations placed on traditional loans and mortgages by the Financial Conduct Authority (FCA) do not apply, and niche financiers can examine each application holistically and bespokely. Ultimately, if the repayment numbers make sense, you have a better chance of being successful.

Why would you use one?

If you’re in the hotel sector, you may be looking for a quick cash injection for a number of reasons. A good broker, like the ones we work with, can help you understand whether this kind of borrowing is ideal for your circumstances.

Land or property acquisition:

Whether you are buying your first hotel or adding to your hospitality portfolio, a bridging loan can act as a first step towards making this happen if you don’t have access to the funds you need immediately, either because capital is tied up in a pending sale or you’re waiting for long-term finance to be approved.

Renovation work:

If you’re trying to grow your business but operating costs alone can not cover the initial outlay, financial bridging to renovate a hotel is a possibility until revenue is available. You might also need one if you are making substantial improvements to a property before it becomes a working hotel but can’t yet get a regulated loan to cover it because it’s unmortgageable in its current state.

Waiting for main mortgage or other financial product:

If you need to move quickly to make a purchase, such as if you’re buying at auction or other potential buyers are closing in, bridging lenders could step in until the approval of the mortgage for your hotel takes its place.

Cash flow is a setback:

Sometimes, even high-net-worth hoteliers and high-turnover hotels face obstacles in cash flow and need a stop-gap in funds. For example, if you’re waiting for a sale to go through or there are unforeseen costs in a building project.

What are the benefits?

These bridging loan products have a number of attractive features, chiefly that they are a quick way of acquiring finance when you really need it and that your whole fiscal status and situation are taken into consideration rather than rigid box-ticking about income and credit history.

Specialist lenders rather than mainstream banks provide hotel bridging loans, and they will look at your circumstances in depth and as an individual case. They will place far greater emphasis on how strong your exit strategy is from the loan, which is good news for hoteliers with complex commercial budgets and turnover, making them adaptable and able to overlook blips in credit history. Sometimes, there are no maximum limits on what you can borrow.

How much would it cost?

Despite the advantages of a bridging loan, it’s worth bearing in mind that it is an expensive financing option and should be taken over in as little time as possible due to the hefty interest that mounts up. Many loans for hotels don’t stretch beyond 12 months anyway, but if you have borrowed millions, your bill will still build up in a short space of time.

To get an idea of what how much hotel bridging financing might cost you, try out our calculator below.

How a broker can help secure the bridging finance you need

When financing reaches this level of complexity, specialist brokers have to be involved to ensure a degree of protection is afforded to both sides of the deal – lenders and borrowers alike need extra support to ensure everything is legitimate and feasible.

In addition to mitigating risk, bridging loan brokers are necessary intermediaries because they have access to this more obscure market, understand the intricacies involved in hotel financing, and can support their clients in a practical and insightful way.

In addition to finding the right provider for you, the brokers we work with will help you get a clear picture of the borrowing you’re about to undertake. They will negotiate on your behalf to ensure you get the best deal possible. When it comes to this kind of loan, savings of just a few percent can equate to enormous sums over the course of the term.

If you get in touch, we’ll arrange for a bridging loan specialist with experience arranging finance for hotel purchases to contact you directly for a free, no-obligation chat.

Eligibility criteria

The unregulated nature of these loans allows for greater flexibility and lending criteria. The biggest factor that will be scrutinised will be your ability to pay the loan back in full, plus fees, without any glitches. The stronger your exit strategy and the clearer you show it in your application, the greater your chance of success.

There are a number of other considerations that might be looked at by lenders, the strength of which could depend on the kind of deal you get. To unlock those all-important favourable rates, you should attempt to show you have:

• Good credit: While this is not as important here, some lenders might be put off by the risk element of poor credit history, making your choice of provider slimmer.
• Experience in your sector: You’ll be deemed lower risk if you have an impressive track record in the hotel industry.
• A hefty deposit: It’s unlikely that you’ll be able to borrow more than 70-75% with a bridging loan. However, the bigger your deposit, the better the rates available.
• Decent security property: A strong security property against the loan will be rewarded with better rates. You can put more than one property up as security.

Lenders and rates

If large bridging loans are seen as a specialist niche, hotel bridging financing is a narrow market, and you won’t find these products among high-street lenders’ offerings. Instead, they are a sub-industry of their own, with Rangewell, Tiger Financial, and Esteema Capital at the helm. Hotel bridge loan lenders also work within the care home sector, offering similar lending terms.

Typical interest rates in this area are about 0.45%- 0.49% (monthly); however, some go as high as 0.6%. This is usually based on around 75% loan-to-value borrowing.

Are there any alternative hotel financing options?

There are other alternatives to bridging loans to finance a hotel that will bring down the cost of your borrowing. Still, they might result in the lengthy and restricted process that the bridging loans successfully avoid. However, they are always worth bearing in mind in case they’re a possibility for you. This is an area your broker will help with.

They involve more standard kinds of borrowing, such as business loans or commercial mortgages. Shawbrook Bank is one example, which is known for offering multi-million-pound commercial mortgages to finance hotel developments.

You could also consider other unsecured loans, mezzanine financing, sale and leaseback or hire purchase.

How to find the right hotel bridging loan broker for you

We work with some incredible specialists in the hotel bridge financing sector, and we can get back to you within the day to begin matching you with the right expert for your circumstances. We understand time is of the essence, as is impartiality, discretion and honesty.

Contact our bridging loan team for a free, no-obligation consultation. Call us on 0330 818 7026 or make an enquiry today.