There are many reasons why you may be considering hotel finance. From building a new hotel to developing an existing property, negating cash flow problems at your hotel or consolidating existing debt, the Rangewell team can help.
The hotel sector is still very much recovering from the impact of the coronavirus pandemic. So, while many hotels have been fully operational for quite some time, the long-term effects of lockdowns and reduced travel will still be felt by hoteliers for a long time to come.
So, whether you require hotel development finance, short term bridging loans or another kind of specialist finance, get in touch with Rangewell today.
How hotel finance can help
At Rangewell, we know the challenges of setting up, buying or growing a hotel – and the ways to provide solutions for them.
There is a range of funding options to help a hotel operator, including:
- Setting up a hotel
- Buying a hotel
- Funding a hotel franchise
- Refurbishing and maintenance
- Funding for assets
- Working Capital Finance
- Merchant Credit Advance
- Tax Loans
- Dealing with problems
If you're a hotel manager looking to grow in the hotel industry, get in touch with Rangewell for advice on real estate financing.
Hotel development finance
If you are planning to build a new hotel from the ground up, redevelop an existing property or even improve the facilities of an operating hotel, then you will need the financial backing to turn your plans into a reality. This is where hotel development finance comes in.
Redeveloping a hotel can be a costly and time-consuming process, so it's vital to have a finance broker by your side who knows the industry and can help find the right finance solution to meet your needs. This may be anything from short term bridging loans through to refinancing existing debt into easier monthly payments... whatever your hotel development finance needs, Rangewell can help.
Building a new hotel
When it comes to building a new hotel, you will likely either start from a plot of land or an existing building with the means of converting it into a new establishment. Depending on whether you own or lease the land, there will be different types of hotel development finance available to you.
The high cost of buying or leasing land or a property in the ideal location can be the biggest barriers for hotel owners looking to launch a hotel business.
Once you have bought your premises you may be faced with costs for refurbishing and converting it to the necessary specifications. Unless it has already served as a hotel, you may need to build ensuite facilities as well as to equip and decorate rooms. You may also need to think about new heating and hot water systems.
You may also need to make costly changes to meet fire regulations, with escape routes and possibly external fire escapes. Unless yours is a very small operation, you will also need to install a commercial kitchen.
Publicity will be another expense. You might also need to budget for things like property maintenance and prepare for additional costs and ongoing expenses until your business becomes profitable.
How finance you qualify for will depend on your location and the size of your hotel, but even if you already own a property, you probably don't have enough cash stashed away to take care of the additional costs involved before you can open as a hotel.
To find out more about hotel management agreements, speak to Rangewell today.
Buying an existing hotel
Buying an existing hotel may involve a large upfront cost, but it means reduced business risks. Raising the necessary finance may actually be easier than staring up.
This is because you have a business that is already operational, and with a trading history that lenders will be able to see and use for the basis of their decision making – it's almost always easier for them to approve a lending for an existing business rather than a start-up.
You also have another advantage, in that you will be buying a business which should be generating predictable profits from day one.
The purchase price will reflect the kind of occupancy rates, turnover and profits the hotel is currently generating. It should also take into account the size and condition of the premises and the potential for growth.
The necessary cash to buy an established hotel business will probably run into hundreds of thousands of pounds. However, because an existing business provides a relatively low risk, it may be possible to provide the necessary funds with a secured loan or commercial mortgage, which will spread repayments over a longer period.
You may need to provide a large deposit to arrange a Secured Loan. Lenders may stipulate that you contribute as much as 40% of the finance required but many will be happy to accept other business assets or your home as security instead.
Writing a suitable business plan, which outlines the current state of the business and your plans to grow it, is vital. This should involve a detailed analysis of the existing business and be supported by accounts and projections of future earnings.
For advice on a hotel purchase, speak to Rangewell today!
Funding a hotel franchise
Many of the world's best-known hotel chains operate on a franchise model. By joining a suitable chain, you might take advantage of an established brand backed by powerful, full-service support, an established online reservation and booking system that can bring guests from across the world to your hotel, and the power of bulk buying to reduce your supply costs.
A hotel franchise would require additional investment, but the potential rewards are extremely attractive. It could enhance your earning potential by offering the prospect of predictable returns from a proven business model.
You will usually need to have secured suitable premises before you can look at a franchise arrangement, but whatever the focus of your hotel, and wherever your location is, the chances are that a suitable franchisor will exist who can work with you to help you make the most of your market.
You may have to pay an upfront fee to the franchisor who owns the brand. You will need to follow this with additional investment in refurbishment, equipment and more to meet their brand standards. Quality counts – from the moment guests enter your reception the franchise agreement will specify the type of experience they should have.
To find out more about buying major hotel brands, speak to Rangewell today.
Refurbishing and maintenance
Hotel premises are required to provide services for guests 24/7. It means that all areas will require constant upkeep and maintenance, and regular refurbishment. It may be necessary to call in specialist contractors who can provide all work to very high standards in the shortest possible time.
Emergencies, such as problems in the kitchen, will require a rapid call out to avoid the potential of lost revenue. All this work may require funding at short notice.
You can apply for funds at any time - but it can reduce costs if you arrange a lending facility before you need it. You can call on it as you wish.
You might also want to arrange the necessary funding before you finalise a purchase, as part of your business plans.
To find out more about hotel refurbishment finance for a construction project or renovation project, our professional team have an in-depth knowledge of the market. We can discuss key issues and provide you with everything you need to know about hotel finance.
We can work with you to help you find the finance you need to answer your hotel operating finance needs.
Types of hotel finance
There are a number of different types of finance available to hotel owners and developers. From supporting the acquisition of land and/or property to invest in redevelopment or even supporting with cash flow, a strong finance stack is key to running a successful hotel.
To determine which type of finance is right for your circumstances, we recommend getting in touch with Rangewell for tailored financial advice.
Hotel bridging finance covers a wide variety of loans, always typically short term and used to 'bridge a gap' in financing. For example, if you need quick funds to support a property acquisition before the mortgage is released.
If you are specifically looking for finance to fund the purchase of equipment then asset finance might be a good option. Hotels require a lot of equipment, such as computers, telephones, kitchen equipment and more, so asset finance is quite common for new and redeveloping hotels.
Refinance and debt consolidation
For hotels still recovering from the COVID-19 pandemic or experiencing bad credit, it might be a good time to revisit your existing finance stack and consider refinancing your hotel to consolidate debt. Many businesses took out short-term loans to support cash flow during the lockdown, and these loans may no longer be the best terms for your hotel.
Merchant cash advance
A great way for businesses to secure funding with the pressure to repay in large amounts, merchant cash advance is a system whereby your finance is repaid when customers pay using their credit or debit cards. A small percentage of each transaction goes to the lender. Making this a great way of boosting cash flow in line with your takings.
Secured and unsecured loans
If you require a large sum of money, a secured loan is often your best choice as it is tied to the value of your assets (usually property), giving the lender the security they need. However, unsecured loans may also be an option, especially if you don't own any significant asset.
Both options depend heavily on your circumstances, including how you intend to spend the money and how long you need it for. So, it's best to speak to the experts at Rangewell to find out what could work for you.
Tax is an issue for every business. A large quarterly VAT or annual tax demand can cause problems with your cash flow, particularly if it falls at the same time as other costs.
Funding is available to let you spread the cost of your tax demands into affordable monthly payments in line with your cash flow. This will help ensure that your business avoids cash flow problems, and can free up cash for use elsewhere.
Working capital finance
Working capital finance is designed to boost the capital available to your hotel business when it is not generating sufficient revenue itself. It's often used to provide cash to pay staff and suppliers while business is slow during the early days, or during slow seasons when your cash flow is already stretched. It is usually designed to be repaid in the short- to medium-term, once your hotel is established and running.
Revolving credit facilities provide you with a line of credit and an agreed limit that you can call on as and when you need it. You only pay for the money you take out, so it can be a cost-effective way to raise funds if you need them in an emergency, or for the short term.
You may have seen the term 'jigsaw funding' to refer to any combination of several types of finance. As the name suggests, this is a bespoke package that fits together - so working with a broker like Rangewell is vital to ensure you have the right combination of funding for success.
These are just some of the common types of hotel finance. To discover whether any or a combination of these is right for you, or whether another option is preferable, speak to Rangewell's team of experts today.
Hotel finance from Rangewell
Working in the hotel sector means that there are many lenders who will be happy to lend to you. But not all lenders will offer the best products or most competitive terms.
With access to the whole of market, including a number of specialist hotel finance lenders, we can help you to secure the most competitive rates for businesses in the sector for all types of finance, including Professional Loans, Unsecured and Secured Loans. plus, as well as the conventional loan products, we can also help you find Alternative Funding, using new loan providers and innovative funding solutions.
Whether you have a straightforward finance need for your hotel or require a more complex ‘Jigsaw' Funding plan made up of a combination of products, we can work with you to find the answers that are right for you and your plans for the future, call us now to get our experts working for you.
To find out more about hotel construction loans, speak to Rangewell today.