Welcome to our second blog on all things hotels! In our first blog we looked at the impact a refurbishment can have on your hotel, if you haven't checked that out yet, you can do so here (LINK). Today we’re answering 7 of the essential questions you should be asking before you get the ball rolling on financing a refurb.

Without further ado, here are the questions you should be asking!

As the owner of my swanky hotel, am I personally responsible for this debt?

As a general rule, yes you are. However, once things get going and you’ve got some confirmed profitability, a decent amount of liquidity inside the company, some unencumbered assets and a good credit history - owners guarantees become less essential to lenders.

Must the new debt be secured with my hotel and/or any personal assets other than the financed equipment itself?

Maybe, sometimes. It's often a requirement but doesn't have to be. The strength of your own credit and your hotel's past successes do a feature. Keep in mind, whilst bank loans are often approved based on the value of all business assets and equipment leases tend to be secured only by assets included in the lease.

What if my business fails before the equipment debt is paid off?! Will I still owe the entire balance or will the equipment’s resale value cover what is owed?

All we’ll say is, be prepared to pay off equipment loans and leases in full. If the equipment is worth more than owed, sell it after paying off the debt, not before! Don't make selling the equipment your financiers responsibility.

If my hotel exceeds all my wildest dreams and is the most popular, hippest place to be, will I qualify for additional financing if I wanted to expand again?

Hold your horses! You may qualify. Telling people that you have a great business is one thing, but you’ve gotta prove that you have a great business with good payment histories and profitable business concepts - all this will make life easier. If lenders can see that you have steady, profitable growth then additional financing gets easier and easier.

Should I expect added fees, interest assessments and late penalties when the loan or lease payments are not made on time?

All financing contracts generally contain fees, penalties and added interest if you don’t live up the payment terms. This is pretty obvious and potentially quite expensive. Take missed/late payments seriously as it will affect your personal credit score.

Financing is a great way to expand your business and make your money work for you, but it's important to have a full picture before you commit to a refurbishment.

Got any more questions? No worries, just pick up the phone and we’ll happily answer any queries you might have!

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