Credit, collateral, and cash flow are some of the major factors lenders consider when it comes to hotel financing. If you have great credit, the right collateral, and healthy cash flow, you’ll most likely qualify for financing. But what about business owners with a not-so-stellar credit?
In the past, there are no business loans for companies with bad credit. But thanks to alternative business lenders, hotel business loans are now available for business owners with bad credit – a credit score 629 or less. Businesses from all industries, including the hospitality industry, can apply for bad credit business loans through online lenders. Here are some of the financing options hotel owners might be interested in:
1. Equipment Financing
If you’re looking apply for a loan to purchase or acquire equipment, check out equipment financing. This type of funding allows you to access working capital to purchase equipment. You don’t have to pledge collateral since the loan is secured by the equipment you’re looking to purchase. Because of this arrangement, it’s easier and faster to qualify for equipment loans. You can use the funds to purchase hotel equipment, such as cooking equipment, laundry machines, furniture and fixtures, kitchen equipment, and more.
2. Invoice Financing
Do you have pending invoices? If so, then you’re eligible to apply for invoice financing. The process of invoice financing is simple: you sell your invoices to a third-party company in exchange for immediate funding. Factoring companies usually give 80% to 90% of the total invoice value upfront. The remaining balance is given to you, minus a small fee, once your customers pay their invoices. Just like equipment financing, invoice financing is a self-collateralized loan since the funds you receive is secured by the invoices.
3. Merchant Cash Advance
If you’ve ever searched for ‘business loans for bad credit’, then you’ve definitely come across merchant cash advance. It’s one of the most popular forms of bad credit financing, but they’re also one of the most expensive ones.
With a merchant cash advance, lenders will advance you a certain amount of money. You pay it back, along with some fees, through a percentage of your credit card sales. If your business is in a slump, you pay less; in the same way, you pay more when business is booming. However, since it’s automatically deducted from your sales, it may affect your cash flow without you realizing it.
The good thing about a merchant cash advance is that it’s readily available to business owners with bad credit. If you don’t qualify for any of the bad business loans, an MCA would be a great alternative.
Hotel Financing through Alternative Lenders
Keep in mind that bad credit loans are only available through alternative lenders. The likelihood of qualifying for a bank loan with bad credit is slim. Alternative lenders like SMB Compass provides hotel financing to businesses with bad credit. Our financial advisors will make sure you’ll only get the best deal possible.
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