Refinancing Family-Owned Hotel Loan to Restore Cash Flow

In the hotel sector, national chains dominate public awareness, but smaller, family-owned hotels play an important role in hosting guests for business and pleasure in towns and cities across the country. These smaller hotels tend to have 10 or fewer bedrooms and focus on providing affordable services to their guests. 

However, smaller hotels generally represent a higher risk to a lender when it comes to securing finance. If you’ve been looking to raise a business loan or other form of finance for your hotel, you may find that offers aren’t as favourable as you had hoped. With no other option, many owners take on these loans and then fall into a cycle of meeting repayments without ever reviewing the loan as their hotel returns to profit. 

We recently helped a small hotel owner who had taken out a £400,000 loan in the past to refinance to a new lender, unlocking further capital to be used to bridge cashflow issues and even reducing their monthly payments…

Why was there a problem?

Smaller hotel owners are generally too busy with the day-to-day management of their premises to review agreements they’ve already made in the past. They are generally happy to simply meet their monthly repayment provided they have the cashflow to do it, so changing loans can seem like an unnecessary hassle that requires the owner to research lenders and fill out paperwork. 

However, for a small, family-owned hotel in Leeds, a £400,000 loan taken out five years ago was still presenting a considerable burden to their cashflow. The owner didn’t have the time or expertise needed to review the loan properly, but they recognised a need to reduce monthly repayments if possible.

Additionally, the owner needed to raise a further £10,000 to invest in a new security and CCTV system, which would add significant value to the hotel and was a crucial step in its growth journey to attract more guests. 

Why we were able to help

The hotel owner contacted Rangewell to inquire about taking on a second facility to cover the cost of their new investment. After discussing their existing loan, we were able to demonstrate the value of refinancing by explaining the process and helping them strengthen their business plan before speaking to new lenders.

Once that step was completed, we identified lenders willing to refinance the loan. We applied and negotiated on the client’s behalf and were able to refinance the entire £400,000 loan over a longer term, which reduced the client’s monthly repayments to alleviate the cash flow demand. In addition, the lender agreed to fund a further £10,000 for the security upgrades. 

The hotel owner was delighted with the result. They could now carry out the work they had planned and reduce their monthly repayments, spreading the loan over a longer term to improve overall cashflow. 

Refinance your small or family-owned hotel

Hospitality businesses depend on cash flow to operate. If bookings drop, finding the money needed to turn things around can be challenging. If you’ve already got an existing loan or credit facility of any kind, you may be surprised at how much additional value you can get from it by speaking to the team here at Rangewell. 

Whether you want to reduce your monthly repayments, raise additional funding or change anything else about your loan, don’t worry about the complexities or paperwork. Rangewell acts as your independent finance expert to help guide you to the best choice.