The key to starting and succeeding in the hotel industry is constant access to adequate funds. And one way to make this happen is by getting business loans for hotels.
Keeping a hotel operation running smoothly can be a difficult task.
Apart from doing your best to satisfy clients, you also need to manage your staff properly so that they can do their jobs well.
And as for your facilities? They need to be in good condition and appeal to old and new guests alike.
To make all that happen, adequate funding is required. It’s the only way for you to run a hotel efficiently.
The reality is that hotels typically run out of business in five years due to a lack of funds. That’s why having access to money when you need it is the key to success in this industry.
You need money to start a hotel business.
You need money to remain in operation.
You need money for your hotel to function optimally.
But how can you get access to funds for your hotel?
That is what we’re going to talk about in this article. We’ll discuss 4 ways you can get hotel financing, whether you’re just starting out or you already own a hotel.
4 Ways to Get Hotel Financing
Way #1 – Dip Into Your Personal Savings
There’s nothing wrong with taking out of your personal savings to cater for a pressing need in your hotel business. People do it all the time.
But you do need to acknowledge that fund as a loan. And as such, it must be paid later. This makes your books less messy and gives you a clear idea of what your finances are.
If your personal savings is substantial enough, you can use it to start your hotel business. Just figure out ways to get continuous access to funds because you’ll need it to maintain the business.
Way #2 – Borrow From Family and Friends
If your personal savings can’t cater to your hotel’s needs, turn to friends and family members. They can provide the funds you need for your business. Of course, this will depend on how much you can convince them and if they like your business idea, plan and execution.
Raising funds from friends and family is usually favourable because the conditions are less stringent than those of traditional lenders. You also have a lot of leeway and flexibility in how you repay the loan.
Way #3 – Pitch to Angel Investors
You can also look to Angel investors to help you with necessary funds to set up a hotel business. With their help, you can raise several thousands of dollars or even millions for your hotel. In return, these investors will want a stake in your company.
What’s more, selling your idea to angel investors is easier when compared with other financing options. It’s because their decision is based on their personal opinion of you, your business plan, and your business acumen.
So, for best results, have a robust and well-written business plan. Research who you are pitching to and include details that will be of interest to them. If your pitch impresses them, there’s a good chance they’ll fund your hotel.
However, getting funding via angel investors is not as hands-off as other options. You have a duty to report to them how you’re using their money. And you may also be called in to brief them on the progress and growth of the hotel.
That’s why it’s important to only approach investors who you like and won’t mind doing business with. It is pertinent to know what exactly they want from their investment and if you can meet those expectations.
Way #4 – Business Loans For Hotels
If you can’t get money from friends, family members, or angel investors, consider taking out a business loan for hotels. They come in handy whether you need funds to start a hotel business or to keep your operation running smoothly.
There are several types of hotel loans offered by financial institutions and even the Australian government. You have the Small Business Administration (SBA) loan, secured and unsecured loans, business lines of credit, and so on. How much you can borrow depends on the type of loan, the lending institution and their terms and conditions.
Now, to access these loans, you must first meet the conditions stipulated by the lending body. These criteria differ from one lending body to another. However, some requirements are common to all of them.
Let’s have a look at them.
Requirement #1 – A Professional Business Plan
Most lenders require that you submit a business plan along with your application. This document must be professional and should cover every financial aspect of your business. It should include the following:
- An executive summary
- An overview of your company
- A market analysis
- Your strategies for success
- Major milestones you’ve achieved.
- Your repayment plan
This boosts the chances of your application being approved and assures the lending body that you can repay the loan. It tells them that you are capable, know what you’re doing, and that they have a lot to gain by lending you the money.
Requirement #2- An Australian Business Number
This is a unique 11 digit number that identifies your business to the Australian government and corporate entities. And it’s a number that’s used to track your loan application.
You can get your Australian Business Number (ABN) for free via the Australian Government’s Business Registration Service. But before you apply, make sure you have a valid means of identification. Also identify your business structure, employee profiles, and core activities.
Requirement #3 – Credit Rating
Some lenders may ask for your credit score, as it will play a role in their decision to grant you a loan. Others may ask for it, but it may not factor into their decision-making process. And there are lenders who won’t even ask for your credit rating before granting you a loan.
Ultimately, this requirement depends on the lending institution and the type of loan. Yet it’s a requirement common to most lenders.
Get Adequate Financing For Your Hotel
Starting, growing, and maintaining a hotel business requires frequent injections of cash. If you don’t have access to funds at the time you need them, your hotel will suffer.
That’s why you should explore the several ways to get funding that was mentioned in this article.
And if you need further assistance, Unsecured Finance Australia is here to help. Apply online and you can receive your approval within 24 hours.
Find out more by taking a look at our unsecured business loans.