Hotel Financing: Best Loan Options and How to Qualify (2023)

You can get hotel financing from a variety of sources, including lenders that specialize in lodging and hospitality. Hotel loans can be used for working capital, to buy or renovate an existing hotel, to build a new hotel or to purchase equipment, furniture and supplies.

The best hotel financing will be the most affordable small-business loan you can qualify for that meets your needs.

If you want the most competitive rates and terms: Bank and Small Business Administration loans can offer low interest rates and long repayment terms, but you’ll need to meet strict criteria to qualify. These loans will also be slow to fund. Learn more.

If you need fast access to capital: Alternative lenders can typically offer hotel financing faster than conventional bank lenders. These lenders may also have more flexible qualification requirements. Learn more.

If you want industry experience: Some lenders specialize in the hospitality industry, offering a range of hotel loans. These companies can use their expertise to guide you through the entire lifecycle of your hotel project. Learn more.

Here are banks and alternative lenders that offer hotel loans, as well as details on how to get funding.

How much do you need?

We’ll start with a brief questionnaire to better understand the unique needs of your business.

Once we uncover your personalized matches, our team will consult you on the process moving forward.

Hotel financing from bank and SBA lenders

Banks and SBA lenders — which are typically banks and credit unions themselves — usually offer low interest rates, long repayment terms and large loan amounts.

To qualify, however, you’ll generally need a strong credit history, solid financials and multiple years in business. You may need to provide collateral to secure your loan. SBA and business bank loans will also have a lengthy application process and be slow to fund.

Nevertheless, businesses with strong credentials may want to consider these lenders to get hotel financing with the most competitive rates and terms.

Wells Fargo

Best for: Variety of financing options.

Wells Fargo offers commercial real estate financing up to $1 million that can be used for a variety of purposes. These loans are available with terms up to 25 years. You can choose between a purchase loan, refinance loan, equity loan or equity line of credit, depending on what type of hotel financing your business needs.

Wells Fargo business loans also include both SBA 7(a) and CDC/504 loans. You can get a 7(a) loan up to $5 million, with terms up to 25 years for commercial real estate and up to 10 years for all other purposes. For 504/CDC loans, you can get up to $6.5 million on the Wells Fargo portion of the loan and up to $5 million on the CDC portion. Repayment terms are up to 25 years for commercial real estate and up to 10 years for machinery or equipment.

Finally, for larger companies, Wells Fargo operates a specialized hospitality property financing division. Through this program, business owners have access to a team of experienced hospitality specialists who can provide tailored financial solutions, such as construction and bridge financing, lines of credit, recourse and non-recourse financing, among others.

(Video) The Best Way to Finance Hotels in 2021: SBA 504 Green & C-PACE with Senior Debt - IFP Episode 144

Celtic Bank

Best for: Faster SBA loans

Celtic Bank is a digital bank that focuses on small-business financing and SBA loans. It is one of the largest processors of SBA 7(a) loans in the country — approving over $725 million in loan volume for the 2021 fiscal year.

Celtic Bank offers SBA CDC/504 loans — in addition to 7(a) loans — and according to its website, has 10 years of experience funding hotel acquisitions, purchases and construction. Celtic is also an SBA Preferred Lender, which helps expedite the funding process, and unlike many SBA lenders, the bank allows you to start and manage your application online.

Depending on your loan type and business credentials, you could qualify in as little as 10 minutes and once approved, receive your funds within 48 hours.

Plus, Celtic Bank offers more than just SBA financing. You can explore other hotel loan options, including equipment financing, construction financing and working capital loans.

» MORE: SBA hotel loans: What to know and how to get one

Hotel financing from alternative lenders

Compared to banks and SBA lenders, alternative lenders usually provide quick funding, with streamlined online applications. These lenders may have looser qualification requirements, but they also tend to offer smaller loan amounts, shorter repayment terms and charge higher interest rates for financing.

If you need a hotel loan fast, you might consider these lenders.

ARF Financial

Best for: Best for borrowers with fair credit

ARF Financial is an alternative lender that provides fast business loans to hospitality companies, including hotels, motels and bed and breakfast inns. You can use a hotel loan from ARF for a range of purposes, including opening a new location, renovating or remodeling, expanding your services or offerings, and marketing or advertising your business.

Hotel financing is available in amounts up to $750,000 with terms up to 36 months. You can complete and submit the online application in about 10 minutes, and if approved, you can get access to funds in as little as three business days.

To qualify for a loan from ARF Financial, you’ll need a minimum annual revenue of $100,000 and at least one month in business. ARF does not require a minimum credit score, but its website states the lender considers a variety of criteria, including but not limited to your credit history, when making an underwriting decision.

Balboa Capital

Best for: Equipment financing

Balboa Capital is an online lender that specializes in equipment financing, offering loans of up to $500,000. Hotel financing from Balboa can be used for fixtures, beds, furniture, chairs, ice machines, security systems, smart appliances, room service tables and luggage carts.

You can apply for a loan online and receive approval in as little as one hour. If you’re approved, you can access funds within the same day.

To qualify for equipment financing from Balboa, you’ll need at least one year in business, a minimum credit score of 620 or higher and at least $100,000 in annual revenue.

(Video) Hotel Loan Programs

Plus, if you’re interested in the speed and flexibility of this lender, Balboa also offers general hotel business loans, as well as hotel franchise financing.

Hotel financing from direct lenders

Direct hotel lenders lend their own money to business owners looking for funding. These companies specialize in the hotel and hospitality industry and offer their expertise in addition to the opportunity to access capital.

You might consider a direct hotel lender if you’re trying to finance a large project and could benefit from an expert working with you from beginning to end. Not all of these companies provide details about interest rates and qualification requirements on their websites, however, so you’ll want to be sure to clarify that information before proceeding.

Avana Capital

Best for: Customized loan structures

Avana Capital has been in business since 2002, offering specialized financing options for hospitality businesses, renewable energy companies and owner-occupied real estate projects.

Avana offers hotel construction loans, SBA CDC/504 loans, bridge loans, as well as conventional loans. Lending specialists can use their expertise in the industry to help you choose the right financing option and customize a loan offer that works with your needs.

If you need a bridge loan, for example, Avana offers interest-only payments for 12 to 36 months, closings within 10 to 30 days and pre-approval in as little as three days. The lender will also finance up to 75% of the as-complete value (the estimated value post-renovation) of the project.

Stonehill Strategic Capital

Best for: Acquisitions and refinancing existing debt

Stonehill is a direct hospitality lender that offers several different types of hotel loans, including permanent loans, bridge loans, construction loans, preferred equity loans and mezzanine loans, which consist of a combination of equity and debt. You may also be able to qualify for a specialized loan if you’re working on a renewable energy (or similar sustainability) project.

Although Stonehill may consider other use cases for its loans, many of its hotel financing options are centered on business acquisitions and refinancing. The permanent loan, for example, offers loan amounts of $5 million to $50 million for these purposes, with loan terms of five, seven or 10 years and amortization from 20 to 30 years. Interest rates are fixed at 4.5% to 6.5%.

This lender also focuses on large hotel investments — the lowest minimum loan amount available is $1 million for building sustainability improvements. For all other hotel loans, the lowest minimum amount available is $5 million.

How to qualify for a hotel loan

Like any small-business lender, hotel lenders will generally consider similar factors — your personal credit score, time in business and annual revenue — when evaluating your loan application.

When applying for hotel financing, however, lenders will likely also consider criteria that are specific to the hotel industry, such as:

Cash flow

Cash flow is the amount of money you have entering your business, minus the amount of money you have leaving your business at a specific moment in time. Positive cash flow can show that your business is financially healthy and able to pay back any potential debt.

(Video) What is a Hotel and Motel Business Loan and Why Should You Apply for One?

Debt service coverage ratio

The debt service coverage ratio, or DSCR, compares your business’s cash flow to its potential debt obligations.

To calculate DSCR, you’ll need to divide your annual net operating income by the potential annual debt payments you’d make for the hotel loan in question. Some lenders require a DSCR of 1.25 — a higher ratio is better — it means you have enough money coming in to pay your existing debts.

Loan-to-value ratio

If you’re looking for a hotel loan to finance a purchase or construction project, the lender will calculate the loan-to-value ratio, or LTV. This ratio is calculated by dividing the loan amount by the value of the property you are looking to buy or renovate.

Commercial real estate lenders will typically offer loan amounts with LTVs that range from 65% to 85%, depending on the type of property and your business’s qualifications, among other criteria.

Net operating income

Net operating income is your hotel revenue minus all necessary operating expenses. This number is calculated pre-tax and doesn’t account for any debt payments, capital expenditures or depreciation.

Hotel lenders will use your net operating income to determine how efficiently your business runs.

Revenue per available room

Revenue per available room, or RevPar, is calculated by dividing the total room revenue by the rooms available. It can also be calculated by multiplying the average daily rate by the occupancy rate.

In either case, this number represents the revenue generated per available room, whether or not they are occupied. Lenders may use this industry-specific metric to evaluate the success and growth of your hotel.

Debt yield

Debt yield is your hotel’s net operating income divided by the potential loan amount. This number indicates the return a lender would see if they were to have to foreclose on your hotel from day one.

Debt yield helps lenders assess the risk of issuing a loan to your business.


Hotel lenders may consider the name of your hotel as they underwrite your loan application. If you’re operating under a well-established brand, the company’s reputation may make it easier for you to qualify for financing.

Although small or boutique hotels may not benefit from brand reputation, those businesses can look for lenders that specialize in their part of the industry instead of those that typically work with larger brands.

Find the right business loan

The best business loan is generally the one with the lowest rates and most ideal terms. But other factors — like time to fund and your business’s qualifications — can help determine which option you should choose. NerdWallet recommends comparing small-business loans to find the right fit for your business.

Frequently Asked Questions

(Video) How to Finance a Hotel Business | Hotel Marketing

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What is the easiest loan to get approved for? ›

The easiest loans to get approved for are payday loans, car title loans, pawnshop loans and personal loans with no credit check. These types of loans offer quick funding and have minimal requirements, so they're available to people with bad credit.

What are 3 things lenders look at when deciding to lend you money? ›

Income amount, stability, and type of income may all be considered. The ratio of your current and any new debt as compared to your before-tax income, known as debt-to-income ratio (DTI), may be evaluated.

What are the four factors you should consider when deciding on a loan? ›

Standards may differ from lender to lender, but there are four core components — the four C's — that lender will evaluate in determining whether they will make a loan: capacity, capital, collateral and credit.

How do you finance hotel development? ›

Hotels can be financed with bank loans, SBA loans, commercial real estate loans, equipment loans, bridge loans or hard money loans. You can get these types of financing from traditional and alternative lenders.

Can you get approved for a loan with a 500 credit score? ›

You can get a personal loan with a 500 credit score if you have a steady source of income! A lender may extend a loan offer if you can provide proof of your ability to make monthly payments on time. Credit scores are typically one of the main qualifying factors for loans.

Can you get a personal loan with a score of 500? ›

It is possible to qualify for a personal loan with a poor credit and a credit score as low as 500, but your choices are very limited. The best way to get a personal loan with a 500 credit score is to start by checking to see if you pre-qualify for loans from major lenders.

What are the 3 C's for a loan? ›

Character, capital (or collateral), and capacity make up the three C's of credit. Credit history, sufficient finances for repayment, and collateral are all factors in establishing credit. A person's character is based on their ability to pay their bills on time, which includes their past payments.

What are the 5 C's of lending? ›

What are the 5 Cs of credit? Lenders score your loan application by these 5 Cs—Capacity, Capital, Collateral, Conditions and Character.

What are the 3 C's when lenders determine credit? ›

Character, Capacity and Capital.

What is the most important thing to consider when getting a loan? ›

Credit score and credit history

A good credit score and credit history show lenders that you pay your credit obligations on time. The better your credit, the better your chances of securing a loan at the most favorable terms. The best terms can save you thousands over the life of the loan.

What are two factors that determine if you qualify for a loan? ›

7 Main Factors That Determine Loan Amounts
  • 1) Credit Score. Lenders determine loan amounts based on a borrower's credit score. ...
  • 2) Credit History. ...
  • 3) Debt-to-Income Ratio. ...
  • 4) Employment History. ...
  • 5) Down Payment. ...
  • 6) Collateral. ...
  • 7) Loan Type & Loan Term. ...
  • Apply for a Loan with HRCCU.
Aug 6, 2021

What determines loan approval? ›

Your credit score is determined based on your past payment history and borrowing behavior. When you apply for a mortgage, checking your credit score is one of the first things most lenders do. The higher your score, the more likely it is you'll be approved for a mortgage and the better your interest rate will be.

How to finance a hotel business? ›

Steps To Consider Before Applying For A Hotel Loan
  1. Become familiar with your requirements.
  2. Select the appropriate lender.
  3. Consider your options.
  4. Verify your eligibility.
  5. Be aware of the processing and closing fees.
  6. Make an application for hotel business financing.
  7. Required documentation.

What are the sources of finance for hotel industry? ›

Franchisors may offer hotel financing for PIPs, but this funding is also available through other sources, such as banks and mezzanine loans. Private Lenders: Non-bank private sources of hotel financing include real estate investment companies, insurance companies, pensions, and a variety of commercial lenders.

What is hotel finance? ›

Hotel property financing in its simplest form is the process of gaining sufficient funds to get your business off the ground – most often a mix of equity and debt, but potentially including any number of blended finance options.

What is the lowest credit score you can have and still get a loan? ›

Generally, borrowers need a credit score of at least 610 to 640 to even qualify for a personal loan.

Can I get a loan with a 571 credit score? ›

Credit Rating: 571 is considered a bad credit score. Borrowing Options: Most borrowing options are available, but the terms are unlikely to be attractive. For example, you could borrow a small amount with certain unsecured credit cards or a personal loan for damaged credit, but the interest rate is likely to be high.

Can you get a loan if your credit score is in the 400? ›

Consumers with very poor credit scores between 400 and 450 often have their credit applications rejected, according to FICO, a credit scoring agency. But it doesn't have to be that way. Loans and credit cards for 400 to 450 credit scores are still available.

Can I get a loan with a 524 credit score? ›

Credit Rating: 524 is considered a bad credit score. Borrowing Options: Most borrowing options are available, but the terms are unlikely to be attractive. For example, you could borrow a small amount with certain unsecured credit cards or a personal loan with no credit check, but the interest rate is likely to be high.

What is the maximum credit score for a loan? ›

CIBIL scores can range anywhere between 300 and 900, with 900 denoting maximum creditworthiness. A CIBIL score of 750 or above in your credit report is ideal.

How much can I borrow with a 550 credit score? ›

How big of a loan can I get with a 550 credit score? The amount you can qualify for with a credit score of 550 usually depends on the lender. One lender that considers borrowers with a credit score of 550 is Avant. They can lend up to $35,000, and their rates range from 9.95%-35.99%.

What is a good credit score? ›

Although ranges vary depending on the credit scoring model, generally credit scores from 580 to 669 are considered fair; 670 to 739 are considered good; 740 to 799 are considered very good; and 800 and up are considered excellent.

When looking for a loan What 3 steps should you take? ›

How to get a personal loan in 8 steps
  • Check your credit score. ...
  • Consider your options. ...
  • Choose your loan type. ...
  • Shop around for the best personal loan rates. ...
  • Pick a lender and apply. ...
  • Provide necessary documentation. ...
  • Accept the loan and start making payments.
Jan 27, 2023

What is a 303k loan? ›

January 12, 2023. Share: A boon to DIYers and home project enthusiasts, an FHA 203(k) loan – also known as a mortgage rehab loan, renovation loan, or Section 203(k) loan – can be used to fund both a home's purchase and renovations under a single mortgage.

What are the 4 Ps in banking? ›

The 4Ps make up a run of the mill marketing mix - Price, Product, Promotion and Place. The plan of marketing mix for the financial services is the prime obligation of the bank proficient who dependent on their skill and greatness endeavor to market the services and plans beneficially.

What makes a good borrower? ›

This includes a solid grasp of one's cash flow, the ability to live within your means, and the skill of keeping accurate and timely financial records.

What are the five P's of credit? ›

Since the birth of formal banking, banks have relied on the “five p's” – people, physical cash, premises, processes and paper.

What factor has the most impact on your credit FICO score? ›

Payment history is the most important factor in maintaining a higher credit score. It accounts for 35% of your FICO score, which is the score most lenders look at. FICO considers your payment history as the leading predictor of whether you'll pay future debt on time.

What's the fastest easiest way to get a loan? ›

The best way to get a loan immediately is to apply online for a personal loan from a lender known for quick approval and funding. The best lender for fast personal loans is LightStream because it funds loans as soon as the same day and has low APRs, large loan amounts, long payoff periods and no origination fee.

What is the best loan to get approved for? ›

Consolidating debt is one of the most common reasons to borrow a personal loan. According to a 2022 LendingTree study, debt consolidation was the most popular reason to apply for a personal loan among consumers with excellent credit.

What app can I borrow money from immediately? ›

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What is the lowest credit score for a loan? ›

Generally, borrowers need a credit score of at least 610 to 640 to even qualify for a personal loan.

Which bank gives instant personal loan? ›

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Who will give a loan to anyone? ›

  • Banks. Taking out a personal loan from a bank can seem like an attractive option. ...
  • Credit unions. A personal loan from a credit union might be a better option than a personal loan from a bank. ...
  • Online lenders. ...
  • Cash advances. ...
  • Cash advance from credit card. ...
  • Buy-now, pay-later apps. ...
  • 401(k) retirement account. ...
  • Family and friends.
Apr 29, 2022

How can I get a instant loan with a low credit score? ›

How to get a Personal Loan when you have a bad CIBIL score
  1. Prove that your income can support EMI payments. ...
  2. Ask for a lower personal loan amount. ...
  3. Apply with a co-applicant or secure a guarantor. ...
  4. Correct mistakes in your credit report. ...
  5. Request your lender to consider your case with a NA or NH in your credit report.


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