Hotel refurbishment loans- what are my options?

Before you apply for a hotel refurbishment loan, it’s important that you understand what your options are.

Many hotel owners, property developers and landlords apply for what is known as property refurbishment finance, for a range of different renovation projects. Whether you’re looking to enhance your property offering, refurbish your hotel before renting or selling it, or simply update the interiors, hotel refurbishment can help attract new guests and help you grow your business.

Looking for a hotel refurbishment loan and wondering what your options are? We’ve created a helpful guide outlining everything that you need to know.

What are the loan options for hotel refurbishment?

There are a number of different hotel refurbishment loans that you should be aware of when looking for finance. The main loan options for hotel refurbishment are:

Bridging loan

You can use a bridging loan to access the finance you need whilst your re-mortgage application process is being completed. Known as a short-term loan that is quick and flexible, a bridging loan can be used for projects such as bathroom and kitchen replacements, redecoration, rewiring and electrical work, or plumbing and drainage work.

A bridging loan is one of the most popular types of property development finance and is widely used for ground-up or light refurbishments.

Refurbishment loan

Refurbishment finance, also known as a refurbishment mortgage, is a loan that is used for the sole purpose of renovating a property. This is a great option if you’re looking to upgrade your hotel quickly and easily.

This type of finance is suitable for both light refurbishment and heavy refurbishment projects. The funds are released in two different stages – the first payment is based on a percentage of the property price and the second is released once the refurbishment has been completed.

Keep in mind that the amount you can borrow is based on the projected value of the property once the renovations have been carried out.

What is a light refurbishment loan?

Light refurbishments usually refer to projects that total less than 15% of the total value of the property and include aesthetic refurbishments, such as:

  • Painting
  • Fitting a new kitchen
  • Fitting a new bathroom
  • Changing fixtures and fittings
  • Changing interiors
  • Replacing flooring

What is a heavy refurbishment loan?

Heavy refurbishments tend to cost more than 15% of the property’s value and involve a lot more work than light refurbishments. Many heavy refurbishment projects also require structural and require planning permission.

Examples of heavy refurbishment include:

  • Major structural work
  • Internal restructure
  • Multiple unit refurbishments
  • Exterior refurbishments

What are the refurbishment finance lending criteria?

Before applying for refurbishment finance, you should familiarise yourself with the relevant lending criteria, this typically includes the following:

  • You must have equity in the property
  • Mortgage repayments must be up-to-date
  • The property cannot be the borrower’s primary residence
  • A valuation must be completed before the application
  • Costings, pricing and an exit strategy must be provided

If you’re considering buying a commercial property, it’s important to speak to someone experienced in the sector to ensure that you are aware of all the funding options available. Get in touch to speak to one of our skilled and experienced team. We are always on hand to answer any of your queries regarding commercial mortgages.

Business Support Finance – COVID-19

Launched in response to the coronavirus outbreak, the Coronavirus Business Interruption Loan Scheme (CBILS) is designed to support UK businesses during this period of disruption. CBILS provides the lender with a Government backed guarantee of 80%, against finance offered under CBILS with the balance of risk being held by the lender.

CBILS is designed to assist with cash flow, initially by way of a Capital Repayment Holiday (Interest only period) of 12 months or a commercial loan over 6 years, with no repayments in the first 12 months followed by a 5-year loan facility on a full repayment basis.

CBILS will only be made available to businesses that were deemed “viable pre Covid 19” and as a consequence a “robust” case must be made for your new Capital Repayment Holiday or loan based on your pre Covid trading information.

It is important to note that if your financial and supporting information isn’t presented correctly to meet the lenders requirements, this could lead to a decline for support, which may impact on your existing loan covenants when considered against your lenders’ “prevailing” debt service criteria which may give your lender cause for concern post Covid 19.

During this period of uncertainty, we at Stewart Hindley & Partners are here to help you and have direct access to all the lenders’ that offer CBILS and who are accredited by the British Business Bank. https://www.british-business-bank.co.uk/. If for any reason your business is not eligible for CBILS then we can provide other routes to finance to support your business.

Given the record levels of demand that banks are incurring for general advice and CBILS applications, we at Stewart Hindley & Partners are able to offer, on your behalf, support through our own FCA relationships with all CBILS accredited lenders.

As a result, we are able to deal with the relevant Business Relationship Manager directly, to ensure a prompt application, with the best possible outcome given your circumstances and thereby take away the uncertainty by securing a decision in-principle within 24 hours.

If you’d like to discuss how we can assist you with your CBILS application or any other funding requirement during these challenging times, then please don’t hesitate to get in touch with us either via completing the contact form or by calling us directly on 01488 684834.