Hotel and motel financing basics means getting the financing for your property with terms you can afford. Whether you are looking for money to buy a new property or restoring a property you already own, finding financing can be difficult in this business.

Most companies require good credit and a business plan before they will lend for a new property. Renovation loans may be a bit easier to obtain, since you already have a proven record of accomplishment with your business. You will still need to advise whether this is a loan to add to your hotel or if you will use the loan to buy equipment or furniture. Look at the following when choosing hotel and motel financing basics:

1. Find commercial hotel loan sources for your new property.

2. Search for companies that provide hotel refinancing.

3. Choose hotel and motel financing for your updating project.

Action Steps
The best contacts and resources to help you get it done

Locate hotel mortgage lenders to finance your new hotel or motel

Lenders will require excellent credit and a business plan since the typical motel loans will be in the millions of dollars field. After you prepare your plan, seek your loan from qualified lenders.

I recommend: Hotel Business offers an article on the importance of the International Hotel/Motel and Restaurant Show. This continues to be an excellent source of information for potential owners who need to know financing sources and other information related to operating their business. STR Global provides reports on all aspects of hotels including new owners and developers. Look at this information to make informed financial choices. Lodging Econometrics offers reports on hotels including sales records and new construction projects. Research the market with their reports before choosing your financing deal.

Utilize hotel financing companies who specialize in hotel expansion loans

Hotel properties may seem adequate at the time of purchase but often once business is booming an expansion loan is in order. Find the finance companies who specialize in these loans to make your project happen.

I recommend: Small Business Administration (SBA) may be able to help you with a financial assistance program. They can also recommend financial companies suitable for the type of loan you need. Consider taking their free online course to see how SBA can help your business. PKF Hospitality Research provides reports with considerable detail on the sales of hotels properties. Find out which property sold for how much before you begin your project.

Secure a renovation loan from hotel lenders for the updates your property needs

New beds, bathroom fixtures, desks, chairs and TV sets are just some of the many items a hotel room offers to its customers. They wear out over time and require extensive capital to replace. Find the financial companies that support these types of loans.

I recommend: Hotel&Motel Management provides an article explaining ways to get needed financing when your first loan prohibits secondary financing. Read this article and others in this online newsletter for hotel and motel owner/operators. All Options provides a list of financial companies within your zip code that may have a program for the loan you need. Start by typing in your zip code.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  Compare rates when shopping for a commercial hotel loan. A small difference in rate can add up to tens of thousands of dollars saved over the life of the loan.

The hotel business is a great business to get into. Most likely, you will need hotel financing to start your business. A commercial hotel loan can help you to pay for the building, renovations, décor, and advertising costs, in addition to other costs that you have. The same is true if you want to own a motel.

Motel and hotel mortgage lenders can help you succeed by loaning you the money you need to start your business. In almost all cases, this money must be repaid within an agreed upon time frame.

There are a few things that hotel and motel financing companies look for when they are considering whether to loan the money:

1. High credit scores. This shows companies that you are able to use money wisely.
2. A good business plan. A hotel or motel financing company will want to know how you plan to build and run your business and whether it is likely to be successful.
3. A strong business team. Having experienced leaders running your business increases your chances of success.
   

Action Steps
The best contacts and resources to help you get it done

Learn your credit score before applying for a commercial hotel loan

Your credit score plays an important role in whether hotel mortgage lenders want to do business with you. It is important that you have excellent credit when applying for any loan.

I recommend: You can get a free copy of your credit report through AnnualCreditReport.com, which lists your score from all three of the major credit bureaus. FreeCreditReport.com is another website that offers this service.

Have a professional business plan

Hotel financing companies require you to provide them with a business plan before they will agree to finance your business. Make sure that yours looks professional.

I recommend: You can find an excellent guide to creating your own business plan at Work.com. A software program, such as the one provided by Business Plan Pro can also help you to write your own. When writing is not your strong point, you can have a custom business plan written for you by companies like MasterPlans.

Get a loan from hotel and motel financing specialists

With a good credit score and a solid business plan, you will feel confident in contacting hotel and motel lenders. Make sure to choose a company that has a good reputation.

I recommend: The National Republic Bank of Chicago specializes in hotel financing as well as motel loans. Bank of America is a national bank that offers many different types of loans for small businesses.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  It will be easier to get motel loans if you find the property first. Motel lenders will be better able to assess the chance for success when they can see the property.
• •  If the first hotel finance company you ask turns you down, do not be afraid to look into other companies. Refine your presentation and try again.
• •  If you have a bad credit score, try to improve it before you apply for hotel and motel financing. Get rid of debt and always pay your bills on time.

Hotel and motel financing news and trends make for interesting reading with today's economic conditions. It is critical to keep up with the latest in operations, costs, staff issues and the abundant other issues that hotels deal with every day.

Subscribe to hotel newsletters, go to trade shows and join organizations that will help you understand this volatile field so you can take advantage of the financing that exists and buy your hotel. Take into account the following about hotel and motel financing news and trends:

1. Read hotel and motel newsletters to find out the latest about operations, costs, how to deal with economic times and more.

2. Go to hotel/motel trade shows and expos to meet commercial hotel loan lenders and learn the latest techniques in borrowing.

3. Join hotel/motel trade associations to keep up with the latest information on motel loans.

Action Steps
The best contacts and resources to help you get it done

Understand hotel mortgage lenders and their rules for lending

Specific newsletters on the hotel industry focus on issues facing hotel owner/operators. They will also contain articles on financing with the focus on today's issues and how to obtain financing in troubled economic times.

I recommend: Hotel Resource offers a newsletter about hotel trends. The articles offer information on staff control, economic times, new construction reports and more. Restaurant News Resource offers information regarding hotel trends, expos and trade shows. Lodging Hospitality Ideas offers a newsletter for developers and operators with great articles on all facets of the hotel business.

Experience a trade show and meet hotel lenders face to face

Trade shows provide information about all facets of the hotel business including insight into how financing works and what alternatives there may be to traditional financing.

I recommend: International Hotel/Motel and Restaurant Show is an excellent place to learn about hotel financing for current times. Call, fax or email them about the specifics of next year's show and read what happened at this year's show. Conventions finds all trade shows by name, organizer, venue, industry and location. Plug in "hotels and resorts" and find all trade shows currently in progress. Attend the ones near you.

Enroll in a hotel/motel association for inside information from motel lenders

Joining an association before you buy your hotel gives you the insider's edge on the financial expectations from people who already went through the hoops. Ask your fellow members for tips, tricks and ideas to get the financing for your new venture.

I recommend: Maryland Hotel & Lodging Association is a state-wide organization for Maryland hotel owners. Join this organization for great information on the hotel financing industry. Hotel Association of Los Angeles deals with all kinds of industry issues including the latest news and issues. Find out about hotel financing and other details of ownership here.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  Compare loan terms from any hotel business financing offers you do receive. Many times the loans are not that much different, but a small difference in term or percentage point can mean the difference of tens of thousands of dollars over the life of the loan.

A hotel or motel is an expensive business to purchase or operate. Most people considering purchasing this type of business or those who need to update or expand the business will need to have financing to do so. Good credit and a good business plan are the basic necessities you will need. This type of business usually requires millions of dollars and so you will want to find reputable sources for your financing. To build a good business plan you will need to have a basic understanding of some key financial terms.

Action Steps
The best contacts and resources to help you get it done

Receivables

Receivables is cash that is owed to a business from its customers. Receivables will be an essential element that a lending institution will assess in deciding how well a hotel or motel is being managed.

I recommend: For a succinct definition and related terms you can find some at InvestorWords.com.

Balance sheet

Balance sheet is a financial accounting term that is the summary of a business's assets, liabilities and equity. Every hotel and motel should have a balance sheet that a lending institution can analyze.

I recommend: There is a simple formula that is used to calculate a balance sheet at Investopedia as well as a definition.

Break-even analysis

Break-even analysis is the examination and determination of when the total revenue in a business received equals the total costs of operating the business. It determines when a business will be profitable. Break-even analysis is usually completed when someone is considering buying a hotel or motel and is required for financing this type of acquisition.

I recommend: If you want a good model to calculate your break-even analysis in a business you can find one at BusinessTown.com.

Cash flow

Cash flow refers to the transfer of cash out of or into a business. It is an important measurement of how well a hotel or motel is functioning from a financial perspective.

I recommend: If you would like to understand more about this term and to see a cash flow template you can find one at Toolkitmedia Group.

Sales Forecast

A sales forecast is a prediction of how much income will be generated from a service or product for a specific timeframe. A sales forecast helps a business owner prepare a budget for their business and is essential for any hotel or motel owner attempting to get financing.

I recommend: For an in-depth explanation of sales forecasting you can find one at L2S. For information on how to create a sales forecast go to AllBusiness.com.

Profit and loss

A profit and loss statement, also referred to as an income statement is, put very simply, revenue minus the costs of operating a business. The costs of running the business include expenses such as operating, taxes, interest and the cost of goods sold. If you are considering financing for your hotel or motel you will need to prepare a business plan and your estimation of your profit and loss of the business is an essential element.

I recommend: To find a definition and a good method for preparing a profit and loss statement you can find one at eSmallOffice.