The finance your guesthouse business needs

The difference between a B&B and a hotel is clear - the first generally operates from a family home, while a hotel is a business with full-time staff and dedicated premises. However, the definition of a guesthouse may be less clear.

If your business provides accommodation for guests and has dedicated premises, the definition of whether yours is a small privately-owned hotel or a guesthouse may simply be a marketing decision.

Certainly, things are booming in the hospitality industry with more people looking at holidays in the UK and guesthouses are sharing in the success.

Of course, there are challenges. Standards have increased across the industry, and guests will expect hotel standards. You will need suitable premises. There will be operating costs including business rates, insurance and staff, even before you welcome paying guests. Food, cleaning, laundry and supplies that come in with each guest that does arrive. Marketing may also be a major cost. The internet has become the key to a successful guesthouse. A website and subscription to a wide range of services such as Tripadvisor will be essential if your guesthouse is to achieve the occupancy you want.

Your funding options

Your guesthouse may present you with a range of funding needs, including:

• Setting up your guesthouse
• Buying a guesthouse
• Refurbishing and maintenance
• Funding for assets
• Working Capital Finance
• Merchant Credit Advance
• Tax Loans
• Dealing with problems

Setting up a guesthouse

Unlike a B&B where owners run a business from their own property, setting up a guesthouse will usually mean finding suitable premises. It may be possible to lease them and borrow for the deposit, but most guest house businesses operate from property bought by the owners. Financial solutions exist to help you buy an existing business or a property suitable for conversion.

Unless it has already served as a guest house or hotel, you may need to build ensuite facilities as well as equip and decorate rooms. You may need a new heating and hot water system, and make changes to meet fire regulations, with escape routes and possibly external fire escapes. You may also need to consider installing a commercial kitchen.

This all mounts up to a sizable sum. Fortunately, we can help you find solutions - which include Commercial Mortgages, allowing you to spread the cost of your purchase over 20 or more years.

Find out more about funding for setting up a guesthouse business.

Buying an existing guesthouse

Buying an existing guesthouse may actually be easier than staring up. This is because an existing business will have a trading history that lenders will use for the basis of their decision making. What’s more, you will be buying a business that should be generating predictable profits from day one.

Buying an established guesthouse business will probably run into hundreds of thousands of pounds. It may be possible to provide the necessary funds with a Secured Loan or Commercial Mortgage, which will spread your repayments over a longer period.

Find out more about funding to help you buy an existing guesthouse business.

Refurbishing and maintenance

Your guesthouse will be providing accommodation 24/7, and all areas will require upkeep and regular refurbishment. Specialist contractors who can provide all work to very high standards in the shortest possible time may be required.

Find out more about funding for repair and maintenance.

Equipping your guesthouse

Your guesthouse will need to be furnished to a high standard and will need some specialised equipment to operate. A country guesthouse may require quirky vintage furniture and accessories, but most guesthouse businesses will need to offer the latest contemporary standards.

You may need hotel-standard items - rather than standard domestic furnishing - to provide the durability and attractiveness your business requires so it can compete in the sector and give your guests a positive and memorable experience. Making sure that of the highest standards from housekeeping, front office and in the kitchen requires a major investment in a wide range of assets. 

At Rangewell we have found that Asset Finance with leasing and Hire Purchase arrangements will let you spread the cost, with fixed monthly repayments avoiding the need for major capital expenditure. 

We may be able to help arrange a single agreement to cover all your equipment needs, whether you are simply buying in some new items or are need to fully equip a new guesthouse business.

Find out more about Asset Finance for guesthouses here.

Tax Loans for guesthouse businesses

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, or during your slow season

Funding is available to let you spread the cost of your tax demands into affordable monthly payments, in line with your cashflow. This will help ensure that your business avoids cashflow problems, and can free up cash for use elsewhere.

See how a Tax Loan can mean better control of your guesthouse cashflow.

Operating Finance

The early days of any new guesthouse business can be financially challenging, and it may take months to start ensuring high occupancy rates and real profitability. Your business may also be seasonal, with peaks in the high season but few quests at other times. The bills will still be coming in, even if guests are not. 

There are a number of solutions to help provide the finance you need. Working Capital Finance is designed to provide cash to deal with the cost of running your guesthouse when it is not generating sufficient revenue itself. It is usually designed to be repaid in the short-term, once your guest house operation is established and when rooms are full. Revolving Credit Facilities are another possibility. These bring a line of credit, with an agreed limit that you can call on when you need it. It means you only actually pay for the money you take out, so it can prove a cost-effective way to raise funds in the short term.  

You will probably take most of your payments through a card terminal or PDQ machine. This can provide the basis for Merchant Cash Advances. The lender provides a cash advance which is repaid by automatically deducting a proportion of the payment every time that a customer pays by card.

We can work with you to help you find the finance you need to answer any of your operating finance needs.

Insurance cover for your guesthouse business

It is essential that you have adequate insurance cover for your guesthouse business, including premises insurance, contents insurance and public liability cover. This could turn out to be a major expense - but there are a number of ways to spread the costs of premiums. Find out more about insurance cover solutions for guest house businesses.

Dealing with problems

Any business can run into financial difficulties. A cashflow problem can be triggered by a seasonal downturn and discovering that you cannot meet your immediate commitments could mean that problem escalates, putting your guesthouse operation at risk.

At Rangewell, we know the solutions which can help your business deal with this kind of challenge.  We can even help if you have a damaged credit history or CCjs, we know the lenders which can help.

Contact us directly to find out more about finance for guesthouse operators facing financial difficulties.

Why you need Rangewell to help capitalise your guesthouse business

The hospitality sector is well served by lenders, but we know those who can offer the most competitive rates for businesses in the sector for all types of finance, including Professional Loans, Unsecured and Secured Loans. Whether your funding need is straightforward or you require a more complex ‘Jigsaw’ Funding plan, made up of a combination of different products, we can work with you to find the answers that are right for you and your plans for the future. 

Call us now and get our experts working to find the guesthouse or hotel finance you need.