Purchasing a franchise hotel is a great way to get started in the hospitality industry. When thinking of acquiring a franchise hotel, it’s important to consider which hotel loans you need. In addition to choosing the right type of loan for your situation, you’ll also need to estimate how much you will need for acquisition and operation costs. It’s important to understand all the financial obligations. Our hotel lending professionals can help design financing products to suit your situation.
Which Types of Hotel Loans May Help with Acquiring a Franchised Hotel?
There are several types of hotel loans you can use for an acquisition, the main ones being bridge and permanent financing.
Bridge loans are generally short-term loans, with repayment terms between two and five years. This type of hotel financing is a good option if you are changing the business plan to help improve cash flow and stabilize operations.
Permanent hotel loans are often a better option for acquiring franchise hotels that are stable and have positive cash flow. Permanent loans generally have lower interest rates and you pay them back over a long period of time. We provide permanent loans with terms of 5, 7, or 10 years.
Costs and Fees to Keep in Mind When Buying a Franchise Hotel
Purchasing a franchise hotel can be a great way to reduce costs for things like marketing. However, you still need to do plenty of research to fully understand the costs involved. Many hotels today fail because owners fail to allocate enough funding to initial operating costs. Therefore, as you consider the hotel loans you need for your venture, it’s important to keep operating costs in addition to the acquisition price in your mind.
Also, there are often costs specifically associated with franchise hotels. For example, franchise transfer agreements often come with property improvements. This is especially true if the previous owners didn’t maintain franchise compliance. Therefore, you may need hotel loans for a property improvement plan for your acquisition. You may want to talk to the franchisor about any changes you need to make to take over the agreement. In addition, you can often get your hands on recent PIP checklists to help you determine the costs for getting the hotel in top shape.
Another thing to consider when buying a franchise hotel is that there are recurring costs and fees you will be responsible for after purchasing the hotel. As you plan with your hotel lending professionals, you will also need to factor these costs in. Otherwise, you could run short of capital until you turn a profit. Things like annual franchise fees and other costs are vital to think about as you begin the process to buy a franchised hotel.
Hotel Lending Experts
At STONEHILL, we’re a direct hospitality lender. Our goal is to provide you with the funding you need for your hospitality goals. We’ve provided over $1.5 billion of hotel financing, from new construction loans to mezzanine financing. Our professionals provide creative solutions for all your financing needs, including acquisitions, recapitalizations, and renovations. Contact us today to get started.