What are the key factors for securing a mortgage for a hotel?
If you’re looking to secure a mortgage for a hotel, lenders will need to consider your financial history and the potential performance of your business. However an application can be complex and rely on several factors: read on for some of the key ones.
Hotel reputation and performance
Lenders are keener to lend to businesses who have strong reputations. Naturally, they will look at the performance and reputation of any hotel that is already trading, ideally looking to cover the last two years of financial accounts. If the hotel is running well and demand can easily be shown, it will certainly help with a mortgage application.
Experience in a sector is a big advantage for anyone looking to start a business. Being a complete newcomer to opening a hotel doesn’t completely rule you out from securing a mortgage, but a lender is more likely to look kindly on an application from someone with proven experience in hospitality.
If you have no experience in running a hotel, experience in running any business or even providing exceptional customer service is a good substitute.
A lender will want to assess the last two years of a hotel's accounts, checking the EBITDA to see how affordable your loan is. Generally, the larger the deposit you’re able to put down, the better the mortgage you’ll be able to afford; good accounts and a strong record will help your case in getting a good mortgage.
Changes to the business and management
When buying a business, future income can often be predicted from past indicators, however changes to the business designed to boost financial performance can help a mortgage application.
A change in the management structure can be just as profitable when it comes to securing a mortgage. If you can prove that you’re cutting costs with a new management structure or even improving a hotel with a refurbishment, you could prove that you’re improving the trading performance of the business.
If you wish to discuss your requirements further or would like more information on commercial mortgages for Hotels, Guest houses or B&B's please don't hesitate to contact us on 01202 937880.