Buying an existing hotel is a great business venture – so is building one. People are always in need of a place to stay that is comfortable and has a pleasant atmosphere and other features nearby. Getting a hotel loan is an important step, even necessary in order to get your new business going. Here is what you need to know about hotel loans to get you started.

The first thing you need to know about hotel loans is that they are not easy to obtain. While this may sound a little negative, you do need to know that most lenders will not lend for the purchase of a hotel unless it meets some rather strict qualifications.

The Qualifications

Most lenders, whether direct or brokers, will require that the hotel come under the "flag" or name of a major hotel chain. Independent hotels, and small chains are just about out of luck these days. Even with the brand name, however, there are still a couple of other major hurdles that may stand in the way.

The hotel to be purchased also needs to be in a good state of repair. Beyond its overall condition, though, it also has to be attractive in appearance. This assures that its current rate of business can continue - or even possibly increase – without needing a separate loan for renovations. As you can see, many lenders may not provide a commercial loan for new hotels.

A third qualification is that the hotel needs to show that it has had a good profit over the past couple of years. So, the books will need to be closely examined to make sure the hotel has been doing well – with the hopes that it can continue to do so. Apart from a past history of success, you will find it difficult to get this kind of commercial loan - at least at a good interest rate. There will probably be a minimum requirement of a profitability of 1:1.1 or more, DSCR values.

Personal Qualifications

The building itself, and the business, is not all that will be considered when you go for a hotel loan. The buyer's own personal experience in the hotel business will also most likely be questioned. A number of successful years experience, as a hotel manager may be needed, too. Some lenders will not lend to someone unless they are going to be both the owner and the manager. Others may require that a proven manager will be brought in to manage the hotel.

Loan Terms

The terms for hotel loans, like any other kind of loan, varies. Being that it is a commercial loan, the interest rate is usually a little higher than a residential loan. In fact, it is possible that a hotel loan will have a slightly higher interest rate than even other types of commercial loans. Also, do not expect a 100% loan in most cases, although some hotel loans will provide that much. Typically, you will find that most range between 70 to 80%, or so.

The payment terms will provide an average range from 20 to 25 years in most cases, but it may amortize in more than that – meaning you need to make a balloon payment at the end. You can find your hotel loan at most commercial lenders’ Web sites. Values start out somewhere around $250,000 and go upwards – enough to cover most existing hotels or build new ones.

Published At: www.Isnare.com