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Best Hospitality Financing and Business Loans

Hospitality is a broad term that includes restaurants, theme parks, hotels, travel ticketing, or B&B. This article covers the top small business loan types for these niche industries.

Financially reviewed by Gordon Scott CMT, on 7.1.2021

At A Glance — A hospitality business requires a lot of initial capital to set up. Hospitality business owners need to provide good service and maintain this service throughout the lifetime of their establishment. Each subsection within the hospitality scene has its specific investment, ongoing costs, and liquidity needs. The various small business funding types covered in this article can work to meet these needs.

Introduction

The hospitality business is season-specific, and its success depends on many factors such as the overall health of the economy and people's motivation to travel. We saw what happened to the travel and hotel niches during the 2020 Coronavirus pandemic.

Recently the situation has improved. Some countries are opening for travel, and many facilities are getting ready to accept tourists. Still, some predictions doubt that the travel levels will get back to normal before 2023.

Recommended Reading: Best Restaurant Business Loans for 2021

Best Hospitality Financing and Business Loans for 2021

Here is a table summary of the best hospitality business loan types, and recommended lenders.

Financing Need

Best Loan Type

Loan Features 

Recommended Lender

General needs like renovation, expansion, debt refinancing, and working capital

Hospitality term loan

Long-Term Business Expansion Loan:

  • Term length: 3-10 years
  • Repayment period: monthly
  • APR range: Between 8% - 25%
  • Min - Max amount: $150,000 - $5,000,000

Credibly

Any need covered

Hospitality line of credit

  • Min/Max loan amount: $1,000/$100,000
  • Repayment term: 12 or 24 wks 
  • Lowest listed rate: 4.66% draw fee

Fundbox

Additional real estate purchase, utilities, taxes, staff training

Short-term loans

  • Amount: Between $5,000 and 500,000
  • Term: Up to 15 months
  • Interest: No interest rate, instead offers one-time factor rate 
  • Time to get the loan: Up to 24 hours

Fora Financial

Real estate purchase, building construction, and renovation

Hospitality SBA loan

  • Loan Amount: $30,000 - $5 million 
  • Interest rates: 4.75% - 7.00%
  • Repayment terms: 10 - 25 years
  • Time to get the loan: One week or more

SmartBiz

Short-term financing

Invoice factoring/financing

  • Amount: $10,000-$500,000
  • Term: 3-18 months
  • Interest: 1.10 - 1.50
  • Time to get the loan: ~72 hours

BlueVine

Equipment and machinery purchasing

Equipment loans

  • Amount: $5,000-$2,000,000
  • Term: 1-10 years
  • Interest: 8-20%
  • Time to get the loan: ~72 hours

Lending Club

Best Hospitality Financing and Business Loans Explained

As we can see in the table above, each loan type caters to a specific need. Let's go through all five loan types in more detail.

1. Credibly - Best for Short-Term Loans

With this loan type, you can do just about anything: renovate, expand, use it as working capital, refinance other debt, and much more. These are some of the most straightforward options given out by banks and financial organizations. Hospitality term loans are affordable and provide the most extended payback periods.

Term loans can help you acquire new business assets or refurbish and improve the ones you have. They are versatile and can help any commercial use case, including other loan repayments, working capital, and staff training expenses.  

Our experts recommend Credibly for your long-term business loan needs as they offer a low APR and longer payback periods. Their business expansion loans are also perfect for renovations and can act as a down payment when expanding your business to a new location.  Credibly also stands out from the competition as they strive to provide small and medium-sized businesses with flexible financing solutions that are suited to their particular needs.

 

2. Fundbox - Best for Business Line of Credit

A line of credit applies to any spending you can think of. Although it's as versatile as the aforementioned hospitality term loan, once you have the line of credit you don’t need preapproval or due diligence for each new expenditure. You can just enter your account and use the available funds on demand.

It's not as large as the term loans, and the repayment period is not as long. But this loan type can help you out if your business meets unforeseen situations and needs emergency funds.

Applying to Fundbox is as easy as registering on their site and connecting your accounting program. Once you're done, an estimated line of credit will display, and if you like the terms you can access the funds with no collateral.

3. Fora Financial - Best for Short-term Loans

The hospitality industry is a costly one that often sees businesses requiring some financial assistance at one point or another. While traditional loans can help out, short-term loans are more preferable as they are easier to get and pay off quickly.

Hospitality businesses that wish to expand or simply ensure there is always cash at hand for emergencies often run into difficulties with banks and other big lenders. Requirements can be very strict and repayment difficult to realistically maintain. Collateral can also be necessary for loan qualification.

The short-term loans that Fora Financial makes possible are really easy to apply for and the repayment terms are flexible. Unlike other loans, these can be repaid in 15 months and if repaid quicker, the lender gives companies discounts as a reward. There is also no need to provide collateral.

4. SmartBiz - Best for SBA Loans

Small Business Administration loans, or SBA, are government-supported risk reduction programs covering startups of any kind. While the SBA is the program initiator, the organization doesn't pay the funds but guarantees risk mitigation for the lender.

These loans can cover real estate purchases, renovations, and building construction expenses. Many businesses in the hospitality sector need such investment to boost their initial capital or expand their business.

SmartBiz is an online marketplace for the best SBA loans. Depending on lender requirements, this platform can match you with the best lenders, which is quicker than approaching banks manually.

5. BlueVine - Best for Invoice Factoring

Invoice financing is a quick invoice-based loan that can cover expenses until the business gets the full payment. It usually acts as a working capital emergency loan that is repaid in a short period of time.

If your hospitality industry establishment gets a large booking that needs extensive preparation and many expenses, this type of credit can help you cover your expenses. 

BlueVine is an excellent option for hospitality industry businesses who wish to get cash advances. BlueVine is generally quick to approve loans and offers affordable rates, plus you will likely receive excellent customer care.

6. Lending Club - Best for Equipment Loans

Equipment loans are straightforward. You have two types of loans in this category: one allows you to buy the equipment with a down payment, while the other is designed to provide you with money to lease equipment. Most of the time, these loans require collateral, which, according to most contracts, is the machine or equipment itself.

Whether you need to buy stoves and ovens for your restaurant, purchase laundry machines for your B&B, or acquire a new ride for your theme park, this loan is perfect for you.

LendingClub is most notable for its agriculture loans. However, it can provide many other funding types depending on your needs, business size, and the goal you want to accomplish. Equipment loans are one of them.

Recommended Reading: Best Hotel Financing Loans for 2021
 

Hospitality Financing Requirements

Here are some basic requirements:

  • Proof of business ownership
  • Cash flow and accounting data
  • Proof of skills and expertise
  • Collateral or no collateral (depending on the loan type)
  • Minimum credit score (optional)

There are likely other specific requirements for each business niche.

How to Choose the Best Hospitality Business Loans

The hospitality industry is an umbrella term for various niche industries.

Evey specialized hospitality business may require a different loan - depending on what the expenses are. For example, a restaurant or a cafe needs different funding mechanisms than a theme park.

When choosing a loan for your hospitality business, you will need to look at factors like the term, amount, and interest rates offered by the loan provider. Do meticulous research to determine if the outcome serves your business's vision and needs before committing to any contract.

Recommended Reading: Best Bed and Breakfast Business Loans

3 Things You Must Know About Hospitality Financing

  1. The number that counts is the total cost of borrowing - Just like buying a house, hospitality financing comes down to a matter of numbers. For instance, there is the interest, the principal, the interest rate, the repayment amount, and more. People often get bogged down in the numbers, and think that one sort of hospitality financing is better than another - when this may not be true. You must pay attention to the total cost of borrowing as this is the number that counts the most. 

  1. Don’t get pressured into borrowing more than you require - Some lenders try to get borrowers to apply for more hospitality financing than they require. This can be a mistake. Borrowing more than you require not only increases your costs, but it can also cause poor spending and investment habits. A smart move is to objectively decide how much you will need and then either borrow additional funds as you go, or take out a business line of credit. 

  1. Collateral is not a requirement - Banks may tell you that you must have collateral for hospitality financing. However, many lending firms offer different lending solutions that don’t need collateral. As well as lowering your risk, loans without collateral are faster and simpler to administer and the process from application to funding can take only a week.  

See Our Additional Guides on Industry-Specific Loans

Bottom Line

Your business needs will differ according to the hospitality sector you are in and your liquidity and assets. In this article, our experts have shed some light on the different hospitality business loans currently on the market. They have also offered insight into the top loan providers for each loan type. Now all you need to do is apply for the hospitality business loan that is right for you.