Hotel Bridge Loans & Development Financing

The hospitality industry encompasses a huge range of commercial property opportunities. The hotel section truly is a unique area.

However, it is very competitive which is why it’s so important to get quick hotel development financing and mortgage loans as soon as possible; with bridging loans being an effective financing strategy.

If you are an existing hotelier, new to the hotel industry, or are a commercial property developer our advisers can offer you a free phone consultation to discuss how hotel bridge loans could help you take the next step in development.

Our advisers have years of experience in brokering bridge loans for hotels, from small to large deals. They have access to a wide range of lenders that can help you to finance your hotel business with a loan to cover a wide range of purposes from cash flow to purchasing.

Can you get a bridging finance on a hotel?

Bridging loans are a form of short-term finance that are secured on a physical asset. A hotel can be used as a security to raise finance.

Bridging finance is not just an option for operating hotels. It’s also possible to raise finance for commercial property purchases and hotel development projects, with the intent to refurbish them into a new hotel.

How do hotel bridging loans work?

Hotel bridging finance is available are short-term loans, with the amount you can borrow depending on the value of the hotel itself if you are existing hotelier.

If you are a commercial property developer, the loan will be secured against other existing assets that you have.

Our advisers can help to arrange hotel development finance quickly from £20,000 at the lower end to bridging loans sometimes in excess of £20 million.

Hotel bridging finance loans can be arranged very quickly. This is because they are secured against your assets with some deals completed with funds released in as little as 48 hours.

How much does a bridging loan on a hotel cost?

Hotel bridge loans are bespoke finance deals put together by our broker team, then negotiated with the right lender to suit you.

In terms of cost, it comes down to the amount of risk you present to the lender, your assets, plans, and development scope, plus the loan term length you are looking for.

Each lender our specialists work with have slightly different offerings. Our brokers and advisers understand that, so will match the right lender most likely to offer you the best terms and deal.

With an in-depth industry knowledge, our advisers take the time to understand your personal circumstances, what you are looking to achieve, and then search for most suitable hotel bridging finance option for you.

What type of projects can you apply for hotel development financing on?

Bridging finance is very flexible when it comes to what lenders deem to be acceptable usage of the money. In most cases, because you are borrowing against the building of the hotel, the lenders will be prepared to offer preferential deals.

The lender will want to know why you are borrowing the money and what your plans are. Below you can see some of the most common reasons that hotel owners or property developers come to us to arrange bridging finance on their hotel.

  • Hotel chain breaks: When purchasing a hotel, you could be in a buyer’s chain, dependent on the other sellers and buyers completing on purchases before you can. If you are unfortunate enough to be involved in a chain break when buying a hotel, bridging finance could help you. A bridging loan lets you to raise finance on your existing property or can complete a forward bridge to ensure the smooth purchase of your property if the chain broke and you were unable to sell the existing asset to finance the completion of the property. A bridging loan could be arranged quickly in as little as 48 hours to ensure you can complete on your purchase.
  • Hotel management buyouts: Bridging finance can also be used for management buyouts. Negotiations can be time sensitive so having the available funds in place to buy out your business partner or current owner is critical to a smooth sale. Having the available finance also puts you in a strong position to secure negotiations quickly.
  • Converting un-mortgageable property into a hotel: We have many clients come to us when they have been turned down by a commercial mortgage lender. A common reason can be where the new hotel development is deemed as un-inhabitable or not fit for. As a hotel entrepreneur and commercial property developer you can see the potential of your building or site as a new hotel but need to raise the finance quickly. Bridging finance can be used where commercial mortgage lenders have said no. Once renovation or development work is completed you can go back to the commercial mortgage lender to apply for a mortgage to pay of your bridging finance quickly.
  • Basement excavation and loft conversions: When looking for ways to maximize revenue in your hotel, basement and lost extensions can let you add more rooms or improve restaurant and function areas. In many cases your commercial mortgage lender will not be able to lend you the money until the property value has increased – but this will inevitably be after the work has been carried out. This situation can leave you stuck, but with bridging finance you raise the money as second charge bridge sitting behind your existing mortgage. You can then carry out the necessary work and remortgage once the property value has increased to pay back the finance. 
  • Extensions and outbuilding conversions: These are also common, particularly with country houses and rural hotels. An unused barn or outbuilding could be the perfect new wedding venue or the space for additional rooms to increase hotel usage and revenue. Unfortunately, it can be hard to raise additional finance on unused outbuilding as they are uninhabitable, making them a huge risk to commercial mortgage lenders. When there is a risk it becomes harder to arrange standard commercial mortgages on the outbuilding. However, once the work is completed you know it will be habitable and mortgageable. Arranging bridging finance to complete the conversion of an outbuilding or barn on your hotel grounds is achievable by raising the funds on the main property to complete the renovations. Once the work has been carried out the value of your hotel or wedding venue could have increased meaning you can go back to your mortgage lender and potentially borrow the money to repay your bridging finance agreement.
  • Multi-unit to single occupancy: The opportunity to convert multiple units into one larger building is popular with hoteliers. The problem can come with financing, as on the standard commercial mortgage route you would need to arrange an individual agreement on each unit and then gain the appropriate permissions needed to convert it. This can be a problem with a normal commercial mortgage as the value of the single units are drastically reduced through conversion work until they have been repurposed into on hotel building. Hotel bridge loans let you secure on a large loan against multiple units in the same area or across different geographic locations. This lets you purchase all the properties needed for your new hotel without the mortgage restrictions mentioned above.

What are the available terms for hotel development financing?

Bridging finance only a short-term funding option, with terms available from 1 month to 3 years.

Our bridging loan experts will work with you to understand your circumstances plus your exit route to ensure that your loan is tailored to your needs.

To apply for a bridging loan secured on your hotel or for new hotel development finance contact the team today for expert advice. We will be able to quickly work with you to show you the available options and how much a loan will cost you.

Need specialist advice?

Complete the form to arrange your initial free phone consultation with a bridging loan adviser: