Looking across the desk from a financial lender may seem intimidating, but it’s actually easy to put yourself in the lender’s shoes. If you’re an entrepreneur on a mission to get hotel financing, you should think about what your prospective lender wants from you so they can approve your loan. There are a few simple requirements you’ll need to meet.
Financial lenders are chiefly concerned that your business has a steady cash flow that will be able to pay back your hotel financing. This means lenders will want your hotel to have a positive cash flow or at least one that’s trending positively, especially if your hotel is new. Along with providing past records of a cash flow and perhaps an operating budget, it is advisable to show your hotel has a good history of tax payments and no or little outstanding litigation against it. It can also help to expand your hotel’s sources of income by offering more services to customers. This will provide further encouragement to lenders.
Where your hotel is located will also help secure hotel financing. If your hotel is situated in a rural town with a small population, you may send a signal that you won’t get a lot of customers. However, if your hotel is located in a major metropolitan area, such as a big city or stretch of suburbia, you stand a greater chance of attracting customers. Location is also important if you have a resort. A resort located near a famous landmark will attract many more travelers than if it’s based in the middle of nowhere. If you can prove your resort is near a busy tourist attraction, you’ll make a better case that your operation will succeed.
Name value is also a factor. A hotel that is part of an existing franchise will instill confidence that the hotel is part of a successful business model and has greater exposure in the marketplace. Also, since the hotel is part of a brand, it will be maintained under a set of standards consistent with that brand. Being associated with a franchise will typically result in lower interest rates, so pursuing a franchise or operating under a flagship is certainly beneficial.
Now that you’ve had a chance to go inside the mind of a lender, you’ll be ready to meet their concerns by building a convincing case that your hotel is a good bet to recoup their investment and successfully secure that hotel financing you’re looking for.
