If there’s one type of business that definitely needs rapid access to funding, then it might be a hotel. Almost more than any other type of business, hotels experience significant seasonal revenue variations. If you run a hotel business, you might also want to access funding for various projects, such as staff training, developing new menus, purchasing new equipment, offering new services such as conference and leisure offers, constructing a brand new hotel, or extending an existing hotel.
Here we look at some of the lenders who might be able to assist you.
Shawbrook Bank
Shawbrook has funded numerous hotel projects in recent years, including:
- The £3.3 million conversion of a Devon hotel into 14-holiday apartments. In this case, Shawbrook reportedly stepped in after the original backer withdrew due to the COVID-19 uncertainty
- A £2.8 million commercial mortgage was granted against the leasehold of one hotel site
- A £5 million commercial mortgage to allow a hotel group to acquire a hotel from another operator, and then to re-develop it with the addition of 28 new bedrooms and a conference facility
If you require a large sum, such as the several million pounds mentioned in these news stories, then Shawbrook offers a range of commercial mortgage products, which might be repaid in regular installments on a long-term basis, perhaps for anything between three and 30 years.
If you don’t require quite as much as this, Shawbrook also offers other financial products that may be of use to hotels, such as:
- Unsecured loans, operate in a similar way to commercial mortgages, except for the fact that unsecured loans don’t need you to offer the hotel or other property as security for the loan
- Bridging finance, which is a form of short-term secured loan where all of the capital and interest is repaid in one lump sum, perhaps when you sell a property
- Mezzanine financing, which is a form of unsecured lending where the lender has the option of converting its right to collect the debt into an equity stake in your business, should you default on repayments
- Sale and leaseback, where Shawbrook would purchase one of your existing assets, but still allow you to use it, subject to conditions
- Hire purchase, where you can spread the cost of purchasing high-value items over a period of time. You might, for example, repay the cost of the asset, plus interest, over a term of up to five years
Bank Leumi
The UK subsidiary of Israel’s Bank Leumi could certainly be described as a specialist in lending to hotels. It employs a dedicated Head of Hotel Finance and has pages on its website specifically dedicated to what it can offer the hotel sector. It has recently financed some high-value projects such as:
- A £49 million development loan to convert an office building in London’s West End into a hotel
- A £65 million loan to finance the construction of an East London hotel
- £27 million to fund major re-developments at the only five-star hotel in central Birmingham
Bank Leumi can support a wide range of hotel projects, including construction, conversion, and renovation; as well as supporting cash flow. If the company has a specific focus, it might be on lending for city center hotels and on hotels that have some form of a unique selling point that makes them stand out from the crowd
Examples of the bank’s credit offerings for hotels include:
- Development finance with terms of up to five years – here the lender might lend between 70% and 85% of the expected value of the completed project, and demand that you offer the property as security. The lender is also likely to ask you to provide a comprehensive business plan for your development project. Once approved, you then repay the sum borrowed, plus interest, over the term of the loan.
- Investment finance with terms of up to ten years
- Credit facilities for up to £10 million
How we can help at FundingBay
Shawbrook and Bank Leumi are just two of the many lenders that offer to finance the hotel sector. Here at FundingBay, we have access to a large number of lenders and can help you find the right lender and the right product to suit your individual circumstances.
Get in touch with the team at Funding Bay or use our calculator to find out what is your business’s best lender option.
