Financing Options for Hotels and the Hospitality Industry
The hospitality industry is competitive and succeeding in an environment like this means being able to be nimble when demand shifts. Access to financing makes all the difference in those situations because the hotels that can renovate, rebrand, and relaunch to meet the changing tastes of travelers each season is the one that will have the edge when it comes to local tourism. If you’re trying to make sure you get ahead of your local competition, you need to know what your financing options are when it’s time to get working capital for your business.
Capital Through Financing or Sponsorship
Private funds often structure loans to hospitality businesses as investments or partial investments. Both straight equity sponsorship and mezzanine structures allow you to avoid adding more debt to the business by taking on an investor. This does dilute your equity in the business, but it can make the difference when you need working capital. Another option is to get a business loan to raise that same capital, and it’s often available from many of the same sources. This loan can be structured as a short-term bridge loan or a secured loan for a new purchase of equipment or other assets.
Refinancing and Debt Restructuring
Another way to increase working capital in the hospitality industry is through debt restructuring and refinancing. Often, different renovations and asset purchases will lead to a series of small debts with a complex set of commitments to outgoing cash between them. By working with a new lender to consolidate, you can save money each month on your payments, reduce interest, and also reduce the number of outgoing payments, which lowers your accounting burden and reduces the costs associated with that aspect of your company’s administration.
Asset Financing for Hospitality Businesses
One more way to raise working capital is through asset financing. Depending on your hospitality business, you might qualify for any one of a variety of asset financing options. Most hotels do a fair amount of business on credit cards, which makes accessing merchant cash advance products easy when they need short-term funds. Other options? Equipment leasebacks for hotel equipment, and there’s always purchase order financing for those who have large events hosted with catering and other services to cover before payment in full is received. The hospitality industry has unique needs, which is why hotels and other businesses in this sector need financing that understands their business model.