Getting a Private Loan to Grow Your Hospitality Business

For hotel owners and developers, getting a loan from conventional lender like a bank or credit union can be an uphill battle.  Due to the very seasonal nature of the hospitality industry, traditional lenders are loathe to loan out money, owing to things like tourism dips and inclement weather.

Of course, as a hotel owner or developer, the last thing you need is high vacancy rates and roller-coaster cash flows.  All of these things present as a glaring red flag to traditional lenders – but not private hard money lenders.

What Makes a Private Lender Different?

Private hard money lenders are ready and willing to step in when banks and other financial institutions will not – helping owners and developers get much-needed capital for their building, renovation or real estate purchase.

In fact, the very nature of the hospitality industry means it needs to create a quality experience for guests at all times of the year – not just during the typical seasonal tourist surge. This makes it more important than ever to get the cash flow needed to help bridge the gaps.

Even if you’ve tried to get a hotel loan, such as an SBA 7a, SBA 504 or USDA B&I loan and have been turned down, or simply don’t want to deal with the financial red tape and the headaches, a private hard money lender can help give you the one-on-one service you need with amenable and flexible terms.

Private hard money lenders are also more open to working with various types of hotels and motels – including:

• Full and limited service
• Extended stay
• Resorts
• Flagged and non-flagged

Whether you want to build a new hotel from the ground up, refinance an existing hotel loan or acquire a hotel,  private lending can open up new opportunities that help you close on your ideal property and get to work building your vision the way you want.

Traditional Lenders Have Become More Selective

If you’re opening a hotel for the first time, it can be difficult to get banks and other traditional lenders to even give you the time of day.  Hotels and motels fall under specific criteria as to whether or not they’ll have their loan request approved and funded.

For example, if you’re opening a flagged (franchised) hotel, you’ll have a better chance of getting a loan than a non-flagged (independent) hotel. If you don’t already have a long history of successfully developing, operating and managing a hotel, banks and traditional lenders will take a hard pass on your application.

What’s more, there’s a catacomb of regulatory frameworks like Dodd-Frank which give banks even more reasons not to consider funding specific types of loans.  This type of shortsightedness ripples out to affect an area’s tourism in jobs that depend on it, such as hotels, restaurants and much more.

Making the Switch to Hard Money Loans

With this in mind, private capital has stepped up to the plate to offer flexible terms and the infusion of cash that hotel owners and developers need to make their vision a reality.  Despite the fact that hospitality projects have a higher risk, so too can they create a much more lucrative reward for everyone involved, which is why private hard money lenders are happy to help shoulder some of that risk.

Often issues which trip up hotel owners and developers, such as limited cash flow, low or poor credit scores or owner/occupier concerns, are much less of a problem for private hard money lenders, owing to their flexibility.  In an area where banks are resistant to lift a finger, hard money lenders will willingly reach out their hand.

We have worked with numerous properties in helping them to secure the hotel development, rehabilitation or expansion capital they need to grow their business. This is particularly notable in areas where commercial real estate is highly competitive and in high demand.

We provide a variety of solutions for the hospitality sector, including owner/user commercial real estate loans, acquisition, refinancing and much more.  No matter what your concerns, we’ll provide you with competitive financing structures, affordable rates and much more, so that no matter how the tourism cycle or the weather behaves, you can be ready to move forward with your hospitality business goals.