What are typical eligibility criteria lenders look for in hotel finance applications?
Short answer
Most lenders assess hotel finance applications on three pillars: the business’s track record and credit profile, the hotel’s trading performance and asset/security position, and clear affordability of the requested finance. Expect scrutiny of occupancy, ADR and RevPAR, EBITDA/EBITDAR, DSCR, available security or guarantees, management experience, compliance, and the robustness of your plan for using the funds.
Your business profile and track record
How much trading history do lenders expect?
For established hotel operators, lenders commonly look for 12–36 months of trading history, with management accounts to the latest quarter. Consistent occupancy and revenue trends will generally strengthen your case, even if seasonality affects monthly performance. Start-ups and pre-revenue hotel acquisitions are typically higher risk and may require added security, specialist lenders, or a strong sponsor profile.
What credit behaviours matter?
Underwriters review both business and director credit conduct, including any CCJs, defaults, arrears, or time-to-pay arrangements with HMRC. Clean filings, timely payments to suppliers and lenders, and stable banking conduct are positive signals. Where there are historic issues, transparent explanations and evidence of remediation can help.
Why management experience changes the risk picture
Hotel lenders value relevant sector experience, brand alignment, and operational know-how. A track record of running similar properties or managing multi-site hospitality operations can materially improve eligibility. Where the operator is new to hotels, credible advisors, franchisor support, or an experienced management company can mitigate perceived risk.
Evidence to prepare
- Latest filed accounts, year-to-date management accounts, and 12–24 month forecasts.
- Director CVs, organisation chart, and staff structure for key functions.
- Bank statements (usually 6–12 months) and any existing facility agreements.
Property, assets and security (hotel-specific)
Freehold vs leasehold: why it matters
Freehold hotels generally offer stronger collateral and can unlock lower rates or longer terms. Leasehold sites can still be funded, but lenders will assess lease length, assignability, rent-to-revenue ratios, break clauses, and landlord consent. Where security is limited, lenders may seek personal guarantees, debentures, or asset-backed support.
Occupancy, ADR and RevPAR benchmarks
Most hotel lenders track occupancy, average daily rate (ADR), and revenue per available room (RevPAR) to gauge trading strength. Comparative data against local comps and seasonality-adjusted performance are important. Clear evidence of how capex or marketing plans will improve these metrics helps justify the funding requirement.
Location and demand drivers
Eligibility improves when a hotel’s location aligns with stable demand drivers. Proximity to transport, business districts, universities, leisure attractions, or event venues can reduce volatility. Lenders may request third-party valuations or market reports to corroborate assumptions.
Compliance and licences lenders may check
- Premises licence, fire safety certificates, gas/electrical compliance, and insurance.
- EPC and planned energy-efficiency upgrades, especially for refurbishments.
- Planning permissions for alterations and fit-out, where relevant.
Affordability, cash flow and performance metrics
What is DSCR and why do lenders care?
The Debt Service Coverage Ratio (DSCR) compares cash available for debt service to total debt repayments. Many lenders look for a DSCR around 1.25x or higher, though criteria vary by risk and facility type. Stress-tested DSCR, factoring in rate rises or softer trading, is increasingly common.
EBITDAR and margin quality
Hotels often quote EBITDAR to show core earnings before rent and certain non-cash items. Lenders assess quality of earnings, cost controls, payroll ratios, and F&B performance. Evidence of operational levers to protect margin during shoulder seasons improves confidence.
Seasonality and cash flow buffers
Seasonal dips are normal, but lenders expect working capital plans and adequate cash buffers. Facilities sized to realistic trading cycles and contingency reserves reduce default risk. Larger projects often benefit from staged drawdowns and ring-fenced capex budgets.
Documents that support affordability
- 12–36 month cash flow forecasts with assumptions for occupancy, ADR, and RevPAR.
- Sensitivity analysis showing rate rises, cost inflation, or demand shocks.
- Capex plan, quotes, contingency line, and a delivery timeline linked to revenue uplift.
Purpose of funds and funding structure
Capex, refurbishment and fit‑out finance criteria
Refurbishment and fit-out facilities hinge on a clear scope of works, supplier quotes, and a realistic project timeline. Lenders evaluate how the upgrade will lift room rates, occupancy, and guest mix. Asset-backed or staged-draw structures may be used to de-risk delivery.
Equipment and vehicle finance criteria
For kitchens, laundry, AV, gym equipment or vehicles, lenders assess asset quality, lifespan, and secondary value. Eligibility improves with reputable suppliers, maintenance plans, and clear ROI or cost-saving evidence. Agreements may be hire purchase, lease, or asset-backed loans with fixed terms aligned to asset life.
Invoice finance and card-revenue solutions for hotels
Hotels with substantial corporate or travel agency receivables may access invoice finance if debtor quality and payment terms are strong. Card-revenue or merchant cash flow facilities can suit venues with steady card takings, though rates and terms vary. Solid reconciliation processes and low chargeback levels support eligibility.
Working capital and cash flow facilities
For marketing pushes, seasonality smoothing, or inventory builds, lenders look for disciplined cash management and predictable trading. Clean bank statements, minimal returned items, and positive average balances can tip decisions. Transparent use of funds and measurable KPIs help align lender expectations.
What Best Business Loans can and cannot help with
Best Business Loans is an independent introducer that connects UK hotels with non-property commercial finance options. We can help explore fit‑out finance, equipment and asset finance, vehicles, invoice finance, refinance, and cash flow facilities. We do not currently support start-ups, sole traders, franchises, property finance, or commercial mortgage applications for hotel acquisitions or remortgages.
If you want sector-specific guidance and to see options tailored to hotels, visit our hotel business loans page to start your Quick Quote.
Application readiness and how to improve eligibility
Practical steps to strengthen your case
Update management accounts and reconcile bank statements before applying. Prepare a concise business case showing how funds translate into occupancy, ADR, RevPAR or cost improvements. Include a delivery plan, KPIs, and contingency to demonstrate control.
Common reasons hotel finance is declined
Applications often fail due to weak DSCR, unconvincing forecasts, missing licences, or unresolved HMRC arrears. Incomplete documentation and unrealistic timelines also raise red flags. Early engagement and clear, evidence‑based assumptions can avoid these pitfalls.
Quick Quote / Eligibility check
Best Business Loans does not lend or provide financial advice, but we can help you identify relevant lenders or brokers for your hotel. Complete our Quick Quote to request an eligibility view and be introduced to suitable providers. It is fast, secure, and there is no obligation to proceed.
Key takeaways
- Lenders focus on track record, credit conduct, management experience, and robust financials.
- Hotel specifics matter: occupancy, ADR, RevPAR, brand, location, and compliance status.
- Affordability tests such as DSCR, stress scenarios, and quality of earnings shape decisions.
- Clear purposes with measurable outcomes improve eligibility for capex and working capital.
- Prepare strong documents: up‑to‑date accounts, forecasts, licences, quotes, and project plans.
- Best Business Loans can introduce you to non‑property finance options relevant to hotels.
Hotel finance FAQs
What financial metrics do hotel lenders assess most often?
Expect close attention to occupancy, ADR, RevPAR, EBITDAR, and DSCR. Underwriters also review banking conduct, HMRC status, existing debt, and margin resilience. Strength in these areas supports both eligibility and pricing.
Do I need to provide security or guarantees for hotel finance?
Security requirements vary by facility type and risk. Asset finance is typically secured on the asset, while cash flow loans may ask for personal guarantees or debentures. Freehold property can improve terms, but commercial mortgages are outside our current scope.
Can a leasehold hotel qualify for funding?
Yes, but lenders examine lease length, rent profile, and landlord consent. Short leases, restrictive clauses, or high rent-to-revenue ratios can tighten criteria. Strong trading and management credentials help counterbalance lease risks.
What documents speed up a hotel finance application?
Provide filed accounts, YTD management accounts, 12–24 month forecasts, 6–12 months’ bank statements, licences, insurance, and any quotes or specifications. For refurbishments, include a detailed scope, timeline, and contractor details. Clear, complete packs reduce lender queries and delays.
Can you help with hotel acquisition mortgages?
We do not support property finance or commercial mortgage applications at this time. We can, however, help hotels explore non‑property funding such as equipment finance, fit‑out finance, refinance, and cash flow facilities. Submit a Quick Quote to see which options may fit your situation.
Important information and compliance
Best Business Loans is an independent introducer. We do not provide financial advice, we do not lend, and we cannot guarantee acceptance or specific rates.
All information is general and for guidance only. Finance is subject to status, affordability checks, and the lender’s criteria.
Promotions aim to be clear, fair and not misleading, in line with UK regulatory standards. Please consider your own professional advice before committing to any finance.