The finance your hotel needs to bounce back from COVID-19
Let our hotel finance experts support your cashflow needs as you "build back better" post COVID-19
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The finance you need to recover and grow your Hotel Business
- Payments geared to your turnover
- Adverse Credit – no problem
- No Income Proof Required
- Repayment and interest-only available
Finance For Property
- Terms up to 20 years
- £50,000 – No Maximum
- Rates from 2% over base rate
- Up to 80% Loan to Value available
- Answers for all types of challenges
- Solutions tailored to your needs
- Arrangements tailored to your circumstances
- Assets, cashflow, growth capital
The hotel sector has become a growth industry in the UK. A falling pound has made the UK more attractive for tourism, while a growing business market means a growing demand for dependable accommodation
UK hotels are enjoying record trading. With a boost in tourism and an increase in business travel thanks to a recovering economy, many hotels are enjoying full rooms and steady bookings. Accommodation remains the main source of revenue, but many hotels are increasing their income still further with bars and restaurants, and facilities for functions such as wedding receptions, or conferences for the business market.
According to the British Hospitality Association (BHA), the industry in total represents more than 45,000 establishments across the UK with a total turnover which is estimated to exceed £40bn. The hotels that make up the sector vary in size, from a few beds in a converted country house to purpose-built skyscrapers in the hearts of cities, with turnovers ranging from below the VAT threshold to multi-million-pound operations.
It could present exciting opportunities if you have a grounding in hotel management. You will need suitable premises and letting rooms which meet and, ideally, exceed the standards your target market demands. There will be operating costs to consider. Business rates, insurance and staff costs will have to be paid even before you welcome a single paying guest. Then there are the variable costs, the 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 a key tool for the receptionist who wants to keep their rooms full. A website and subscription to a wide range of services will be required.
Your funding options
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 which can help you, 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
Setting up a hotel
Setting up a hotel will usually mean finding suitable premises. It may be possible to lease them and borrow for the deposit. However, opening a hotel will usually mean owning the property.
A seaside location may have an obvious appeal for the family holiday market, while a quiet countryside location might be better suited to older guests. An urban location might be ideal for business customers.
The high cost of buying a suitable property in the right location can be one of the biggest barriers to launching a hotel business. But financial solutions exist to help you buy an existing hotel business or a property suitable for conversion.
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 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.
It mounts up to a sizable sum. Just how much 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.
Find out more about funding for setting up a hotel business.
Buying an existing hotel
Buying an existing hotel as a going concern 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 which is already operational, and with a trading history which lenders will be able to see and use for the basis of their decision making – it’s almost always easier for them to approve 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.
Find out more about funding to help you buy an existing hotel business.
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 for 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, 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.
Find out more about Franchise Funding.
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.
Find out more about funding for repair and maintenance.
Any hotel needs a wide range of specialised equipment to operate. While it may be possible to equip a country hotel with quirky vintage furniture and accessories, most hotels will need to offer the latest contemporary equipment to be competitive and present a positive and memorable experience for guests. Making sure that you can offer the highest standards from housekeeping, front office and in the kitchen requires a major investment in a wide range of resources.
The list of equipment for bedroom suites alone is substantial:
- Alarm Clocks
- Bathroom Fittings
- Bedroom linen
- Coat Hangers
- Coffee Makers
- Hospitality Trays
- Luggage Stands
- Trouser presses
- Waste Bins
In many cases, it will be necessary to use branded items to reduce pilfering.
You and your staff will also need:
- Housekeeping Carts
- Luggage Carts
- Food and beverage trolleys
- Cleaning carts and equipment
Your hotel will need a kitchen, with equipment that must be dependable and robust, energy-efficient and with the capacity to meet your operational needs, including,
- Convection Ovens
- Conveyor Ovens
- Cook & Hold Ovens
- Countertop Equipment
- Dishwashing Equipment
- Hot Plates
- Ice Machines
- Microwave Ovens
- Proofing & Holding Cabinets
- Prep Tables & Units
- Rotisserie Ovens
- Refrigerators & Freezers
- Steamers & Kettles
Hotel Business technology
You will also need equipment to help you run your business. An integrated room management and booking system can cover all your needs, from billing to accounts, while many hotels are using electronic systems to drive profitability in such areas as in-room service upgrades.
Funding your equipment needs
Buying all this equipment and more - like conference seating and displays - outright can be impossible for most businesses. At Rangewell, we have found that Asset Finance, including leasing and Hire Purchase, let you spread the cost, with fixed monthly repayments avoiding the need for major capital expenditure.
However, many hotel equipment providers will offer finance plans. These can help them secure a sale or a lease agreement.
While these may often appear to be good value, the chances are that the supplier will have arranged a deal which is in their best interests rather than yours. At Rangewell, we can often help people beat the funding deals offered by suppliers.
Not only are the terms and rates we can secure often more competitive, we may also be able to help arrange a single agreement to cover all your equipment needs, whether you are simply buying in some new equipment or are ready to equip a new hotel.
Find out more here.
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.
Benefits of a Tax Loan include:
- Better control of cash flow
- Fixed monthly payments
- Quick and simple to arrange
- Avoids issues with HMRC and potential penalties
Take a look at how a Tax Loan can mean better control of cash flow with fixed monthly payments.
The early days of any hotel operation are challenging, and it may take months to start ensuring high occupancy rates and real profitability. The bills will still be coming in, even if guests are not.
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 cashflow 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.
Merchant Cash Advances may be ideal if you take payments through a card terminal or PDQ machine. The lender works with your payment company and can advance you the equivalent of up to one month’s turnover, 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 your hotel operating finance needs.
Insurance cover for your hotel business
Insurance cover will be a major cost for your business. Premises, contents and public liability cover will all be essential. This may be a major expense - but there are a number of ways to provide for the costs. Find out more about professional indemnity solutions for hotel businesses.
Dealing with problems
Even the best-run hotel 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.
At Rangewell, we know the solutions which can help your business deal with this kind of challenge. We can provide funding solution if your business has run into difficulties - and even if you have a damaged credit history or CCjs, we know the lenders which can help.
REAL EXAMPLES OF WHAT WE CAN DO
Find the most competitive loan to help an experienced hotel manager buy his own hotel
Help an established hotel completely refurbish their 42 room premises
Help a national hotel chain equip provide wi-fi in every room as a billable extra service
Find the most competitive finance to allow the owners of a historic country house convert and equip their premises as a resort hotel
Help arrange ‘Jigsaw’ Funding to allow an experienced hotel operator manager to buy an established business
Why you need Rangewell to help capitalise your hotel business
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 most competitive terms.
We know the lenders who can offer 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.
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Our goal is very simple - to help businesses find the right type of finance as quickly, transparently and painlessly as possible.Find Funding
Helping you build your profits
Lending tailored to your hotel businessAt Rangewell, we can help you find the most appropriate funding for any requirement your business has. We save you money and help you move your business forward.
Helping you buy premises for a hotelStarting a hotel can be a major cost because a property is essential. A commercial mortgage can provide the level of funding required.
Building a more profitable businessThe success of your hotel depends on the facilities and services you can offer. By leasing the latest equipment, you can provide guest with the level of accommodation and care they want.
How Asset Funding reduces riskMost lending must be ‘secured’ on an asset of some kind that the lender may take if you don’t keep up the payments. If your hotel was unable to make the payments on any asset it would simply be removed from your business.
A full range of fundingYou may need a range of funding to set up and build your business. At Rangewell, we can help you find the solutions you need, from Commercial Mortgages to Asset Finance, and more.
Specialist lendersSome funding providers specialise in particular sectors. At Rangewell, we can help you find the most appropriate lenders for your hospitality business.
Download Rangewell’s free and detailed guide to Finance for Hotels and Motels
What types of finance are there and which are the most appropriate for the hotel sector?
Find out why not all providers are equal and why it will save you money by finding the one that’s right for you
The downsides to certain finance solutions for the hotel sector and how you can avoid them
How to arrange the finance your hotel business requires, including support on what paperwork you need
Key finance terms explained so you can make the most appropriate choice for your hotel
Download your free guide now
Getting the right funding arrangement is essentialThere are many forms of business finance available. Getting the most appropriate type for the challenges your hotel presents is essential to control costs.
Your key equipment could be at riskIf you are unable to keep up repayments on a hire purchase or lease agreement, the equipment your hotel depends on could be repossessed.
Long-term financial commitmentsYou may not be able to pull out of any long term finance arrangement once set up.
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