Hoteliers have many reasons to need a loan. Deciding on the best loan for your hotel business depends on what it will be used for. Depending on your circumstances, lenders may use a commercial mortgage, a bridging loan, development finance, or an unsecured business loan to fund a hotel deal. This guide covers each option, explains who provides hotel loans in the UK, sets out what eligibility looks like, and gives you the rate and fee ranges you need to benchmark your options.
What are hotel loans?
“Hotel loan” refers to any finance used to buy, refinance, renovate, or expand a hotel, guesthouse, or bed and breakfast. Hotels are assessed differently from other commercial property because lenders need to understand the business as well as the bricks. Occupancy rates, RevPAR (revenue per available room), seasonal cash flow, and the borrower’s hospitality experience all factor into a lender’s decision, which is why hotel lending is more complex than a standard commercial mortgage.
Hotel finance is used by independent hoteliers, property investors entering hospitality, existing operators looking to expand, and first-time buyers. Each group will face different questions from lenders and different product options.
Types of hotel loan
Commercial mortgage for hotels
A commercial mortgage is the most common route for established hotel operators. It is long-term secured lending against the hotel property, with terms typically running from 5 to 25 years and loan-to-value (LTV) ratios up to 70 to 75%. It suits purchasing a trading hotel or refinancing an existing one. Lenders assess EBITDA (earnings before interest, tax, depreciation, and amortisation) alongside occupancy history and trading accounts. Read more about long-term secured hotel finance on the Apt Pay commercial mortgages page.
Bridging loan for hotels
A hotel bridging loan is short-term finance, typically up to 24 months, used when speed or flexibility matters more than a long-term rate. Common scenarios include buying a hotel at auction, bridging between selling one property and completing on another, or funding a refurbishment that means the hotel does not yet qualify for a mortgage. Bridging loans are secured against the property and can move quickly once the application is approved. See the Apt Pay hotel bridging loan page for scenarios and indicative sizes.
Development finance for hotel projects
If you are building a hotel from the ground up or converting a building, such as an office block or care home, into a hotel, development finance is the relevant product. Lending is assessed against the gross development value (GDV) of the completed scheme rather than current trading performance. Planning permission and a credible development track record are standard requirements.
Unsecured business loans and merchant cash advances
For existing hotel operators needing short-term working capital, unsecured business loans and merchant cash advances (MCAs) offer faster decisions and smaller amounts without using the property as security. An MCA repays through a fixed percentage of daily card takings rather than a fixed monthly sum, which suits seasonal hospitality businesses where revenue varies significantly across the year.
Asset finance
Asset finance covers hotel equipment rather than the property itself: kitchen fit-outs, furniture packages, payment systems, and similar items. The asset serves as security, so property is not required as collateral. Asset finance cannot fund a hotel purchase but is a practical route for operators investing in the fabric and operations of an existing property.
What can hotel loans be used for?
Hotel finance covers a wide range of circumstances. The most common uses are:
- Purchasing a hotel: Full acquisition of an existing trading hotel or guesthouse, usually through a commercial mortgage or bridging loan.
- Refinancing: Releasing equity from an existing hotel to fund expansion, reduce monthly costs, or restructure debt on better terms.
- Renovation and refurbishment: Light refurb work such as redecorating or upgrading a kitchen can be funded through a commercial mortgage or short-term loan. Structural work, extensions, or change of use typically requires development finance or a bridging loan.
- Portfolio expansion: Acquiring a second or third site. Lenders assess the whole portfolio, not just the new acquisition, so existing performance matters.
- Working capital: Covering off-peak cash flow gaps, paying VAT bills, funding a marketing campaign, or taking on seasonal staff ahead of a busy period.
Who are hotel lenders in the UK?
There is no single type of hotel lender. The market is split into several categories, each with different criteria, rates, and appetite.
High street banks
High street banks offer the lowest rates, from around 2.25 to 3.5% for strong applications, but they have the tightest criteria. Expect a minimum 60% LTV, two to three years of profitable trading accounts, and proven hospitality experience. Most prefer capital repayment structures rather than interest-only.
Challenger banks
Challenger banks apply slightly more relaxed criteria, will lend up to around 70% LTV, and are generally comfortable with interest-only structures. Rates typically sit between 3.5 and 6.5%.
Specialist commercial lenders
Specialist lenders are the most flexible category. They will consider poor credit, limited trading history, or applications supported by projections rather than historic accounts. The trade-off is higher rates, typically 6.5 to 18%, and lower LTV. Interest-only is usually the only viable structure at this end of the market.
Private lenders and funds
Pension funds and insurance companies are active in prime hotel locations, attracted by stable long-term returns. These are relevant mainly for larger deals in established, high-demand locations.
Why working with a broker matters
No single lender covers every hotel finance scenario. A specialist broker with hospitality lending experience accesses the full market, matches the lender type to the deal, and packages the application in a way that gives it the best chance of approval at the right rate. For most hotel finance deals, working with a specialist broker is rarely optional.
Eligibility criteria for hotel finance
Lenders assess hotel finance differently from standard commercial lending. Here is what they typically look at:
- Hospitality experience: Most lenders prefer the borrower to have run a hotel, guesthouse, or hospitality business before. No prior experience does not rule out a deal; management experience, customer service roles, or a strong operator partnership can all help make the case.
- Trading accounts: For an existing hotel, expect to provide two to three years of accounts. Lenders review EBITDA to assess whether the business generates enough to service the loan.
- Hotel reputation: Online reviews are a real factor. A poor review profile raises questions about future occupancy. If you are taking over a poorly rated hotel, a clear turnaround plan matters.
- Deposit and LTV: Commercial mortgages typically require a 25 to 40% deposit, giving a 60 to 75% LTV. Bridging loans can stretch higher, but first-time buyers rarely achieve over 70% LTV. A larger deposit generally unlocks better rates.
- Business plan: Essential for all applications and more so for first-time buyers and conversion projects. It should cover your target market, occupancy projections, marketing strategy, and management structure.
- Credit history: A poor credit history does not automatically prevent hotel finance. Specialist lenders exist for this. Being upfront about any issues, with a clear explanation, puts you in a stronger position than an application that raises questions the lender has to find for themselves.
- Occupancy and location: Lenders look at footfall, proximity to transport links, the split between business and leisure demand, and seasonal risk. A hotel in a high-occupancy market with year-round demand is easier to finance than one with strong seasonality and no clear off-peak strategy.
Hotel loan rates, terms, and fees
Rate ranges vary by lender type, LTV, loan size, and trading performance. The figures below reflect the current UK market; individual offers will depend on your specific application.
Commercial mortgage rates
- High street banks: from around 2.25% for strong applications
- Challenger banks: 3.5 to 6.5%
- Specialist lenders: 6.5 to 18%
Bridging loan rates
Hotel bridging loans are typically priced at monthly rates, from around 0.75 to 1.5% per month depending on the risk profile. Terms run up to 24 months. See the hotel bridging loan page for more detail on how these work in practice.
Fees
- Arrangement fee: typically 1 to 2% of the loan amount
- Valuation and legal fees: vary by property size and complexity
- Exit fees: some lenders charge these, so check before signing
- Broker fees: may apply depending on the lender and deal structure
Loan terms
- Commercial mortgages: 5 to 25 years, though some lenders cap at 15 years for hospitality
- Bridging loans: up to 24 months
- Development finance: tied to the build programme
A worked example
Buying a £1.2m hotel at 70% LTV gives a loan of £840,000 and a deposit requirement of £360,000. At 6.5% on an interest-only basis, the monthly repayment would be around £4,550. At a lower rate of 3.5%, the same loan costs around £2,450 per month. The difference underlines why your eligibility profile and choice of lender type have a significant impact on the total cost of the deal.
Tips for getting your hotel loan approved
Lead with your deposit
A larger deposit signals commitment and reduces lender risk. If you are short of the standard 25 to 40% requirement, consider whether other assets, such as a personal property or an existing commercial property, could be used as additional security to strengthen your position.
Get your accounts in order
Two to three years of clean, up-to-date accounts removes a key lender objection before it is raised. If your accounts show declining profit, have a clear explanation and a forward plan ready. Lenders are used to seasonality and one-off events; what they are less comfortable with is a downward trend with no narrative around it.
Build the business plan before you approach lenders
A strong business plan covering occupancy projections, your target market, marketing strategy, and management structure can compensate for limited direct hospitality experience. It also demonstrates that you have thought carefully about how the hotel will perform under your ownership.
Use a specialist broker
Hotel finance is not a standard product and the market is fragmented. A broker with hospitality lending experience knows which lenders are currently active, what their appetite looks like, and how to structure an application that works. The additional cost is usually worth it on any complex hotel deal.
Be upfront about weaknesses
Poor credit, limited hospitality experience, or a hotel that is currently underperforming are all manageable with the right lender and the right framing. Address them directly in the application rather than waiting for the lender to raise them. A clear explanation with a credible plan is consistently more persuasive than silence.
Frequently asked questions
Can I get a hotel loan as a first-time buyer?
Yes, though criteria are tighter than for established operators. A strong business plan, relevant management or customer service experience, and a larger deposit all improve your chances. Specialist lenders are more willing to consider inexperienced applicants than high street banks, which typically require a trading history before they will lend.
What is the minimum deposit for a hotel mortgage?
Commercial mortgages typically require a deposit of 25 to 40%, giving an LTV of 60 to 75%. Some specialist lenders may stretch to 80% in limited cases, though this usually comes with higher rates and stricter income requirements.
How long does it take to get hotel finance?
A commercial mortgage typically takes 6 to 12 weeks from application to completion, though complex deals can take longer. Hotel bridging loans can complete in days to weeks where urgency is required. Auction finance operates on the tightest timelines of all, given the fixed completion dates attached to auction purchases.
Can I get a hotel loan with bad credit?
Yes. Specialist lenders cover this part of the market. Rates will be higher and LTV lower than for a clean credit profile, but a poor credit history does not automatically prevent hotel finance. Being transparent about the circumstances, with a clear plan for the business, helps.
Is a hotel loan the same as a holiday let mortgage?
No. Hotel mortgages cover operating businesses with staff, facilities, and multiple rooms managed as a commercial enterprise. Holiday let mortgages apply to individual residential properties let on a short-term basis. They are different products with different criteria and different lenders. Note that changes to the furnished holiday let (FHL) tax treatment introduced in April 2025 by HMRC have shifted some investor attention from holiday lets toward hotel and guesthouse models. If you have come to hotel finance from that direction, a specialist broker can help you understand the different product landscape.
What is the difference between a hotel bridging loan and a hotel commercial mortgage?
A bridging loan is short-term finance, up to 24 months, used when speed matters or when the property is not yet in a condition that would qualify for a mortgage. A commercial mortgage is a long-term product, 5 to 25 years, suited to a trading hotel with accounts to support the application. The two products serve different stages and situations, and in some deals they are used in sequence: a bridge to complete the purchase or refurbishment, followed by a commercial mortgage once the hotel is trading.
If you would like to talk through your hotel finance options, speak to the Apt Pay team or read more about commercial bridging loans for short-term hotel deals.
