Best Financing Options for Hospitality Industry in 2021

Delivering an outstanding customer experience is one of the primary goals for the hospitality industry. Whether you want to build your dream hotel or your existing property needs a serious face-lift, the right business funding is essential in the hospitality industry.

What is Hospitality Industry Financing?

Hospitality financing is a type of loan product specially designed for helping businesses in the hospitality industry. These loans vary in size and structure, with different financing options for smaller hotels versus larger corporate hotel chains.

Best Types of Loans for the Hospitality Industry

Not sure what type of hospitality financing is right for your business? Well, you’ve come to the right place. Explore some of the most popular types of funding so you can choose a loan that will meet your unique financial needs.

Terms Loans

This is one of the most common types of financing that business owners use to run and grow their hospitality businesses. Because of its competitive interest rates, it’s considered the most affordable type of financing. Additionally, unlike other business financing, a term loan lender usually charges the lowest fees.

A term loan can be used for a variety of purposes in your hospitality industry, from acquiring a new business to purchasing real estate, refinancing debt, as well as just about any other commercial use. You can get an amount up to $500K with an interest rate as low as 5% and a repayment term up to 1-25 years.

Business Lines of Credit

If you’re looking for a flexible financing option that you can access whenever you need then a business line of credit is the perfect option for you. Unlike a traditional business loan, you have the flexibility to borrow a predetermined amount of funds. You only pay interest on the amount you’ve used to make the funds available again.

From dealing with negative cash flow situations to financing capital expansion to purchasing and more, a business line of credit can be used for a variety of purposes in your hospitality industry. These small business loans can be both secured or unsecured. You can finance up to $500K with an interest rate as low as 8% and a repayment term of up to 2 years.

SBA Loans

SBA funding is yet another great option for the hospitality industry looking to obtain affordable and quality bank-rate financing they wouldn’t secure otherwise. If you’re a part of the U.S territory, you’re eligible for these loans. However, the loan approval process of an SBA loan can be complicated and you may have to wait for a few weeks to months to get funds into your bank account.

With an SBA loan, a business can get up to $5M with rates ranging from 4% to 10%. Besides that, this loan option offers you the longest payment terms that are ranging from 5 to 25 years. Whether you want to expand or renovate your existing hotel business, purchase inventory, equipment, machinery, and supplies, or repay off your debt in your hospitality business, an SBA loan is the best option for you.

Asset-Based Loans

Do you need immediate funding to move forward? Are you having a cash crunch and need capital to operate and grow your hospitality business? An asset-based loan can help you grow and get the success you deserve.

You can use your inventory, real estate, equipment, or machinery to secure asset-based loans. Depending on the current value of your assets, you can finance up to 80%-90% of the amount. These loans are easy and quick to obtain and require less documentation. Even if you don’t have perfect credit, you can still apply for a loan.

Working Capital Loans

If you’re struggling to cover day-to-day and other short-term expenses in your hospitality business, a working capital loan might be your perfect option. Invoice financing, merchant cash advance, unsecured lines of credit are some of the most sought-after working capital loans for the hospitality industry.

Due to its lower amount and shorter terms, the application process of working capital loans is usually easier and faster. You don’t need to have a perfect credit history and annual revenue and provide only a few documentation to obtain the loan. Once approved, you can get the funds into your bank account in as little as 24-48 hours.

Final Thoughts

Though there are some great financing options to successfully run and grow your hospitality business, it’s always a great idea to research your options before choosing one. Use an online lending marketplace to find and compare the best hospitality financing offers from multiple lenders so you can choose one that best fits your current financial needs and budget.