Hotel finance: how lenders fund a hotel as a going-concern trade
We arrange hotel finance for operators, owner-occupiers and investors buying, refinancing, refurbishing or developing a hotel. A hotel is a trading business, so a lender underwrites it as a going concern on its fair maintainable trade rather than on bricks and mortar, and the loan is sized on the debt service that trade supports. This is commercial finance against the hotel and its income, not a regulated mortgage on a home.
Stabilising hotels
Hotel finance is the commercial lending that funds the purchase, refinance, refurbishment or development of a hotel. Because a hotel is a trading business rather than a passive property, a lender values it as a going concern on its fair maintainable trade, the sustainable operating profit a reasonably efficient operator would produce, capitalised at a market multiple. That going-concern value, not a vacant bricks-and-mortar figure, is the number a commercial mortgage is sized against.
Lenders read the trade through occupancy, average daily rate and the RevPAR they produce, the flow-through to EBITDA and fair maintainable operating profit after payroll and rising business-rates and wage costs, and the brand, franchise or management agreement behind it. They size the loan on loan to value against going-concern value and on the DSCR the maintainable trade covers, and they underwrite a freehold owner-occupier differently from a hotel held on a management agreement or let to a tenant on a lease. UK hotel occupancy held near 76.1% in 2025 (STR, 2025) and regional RevPAR closed the year around £79 (HotStats, 2025).
Hotel deals take a few shapes and we structure each on its own logic. A purchase or refinance is usually a commercial mortgage or term loan amortising over 20 to 25 years; a repositioning or refit is a bridging loan or refurbishment facility across the works and the trade build; a new-build or major conversion is development finance drawn against a monitoring surveyor, then refinanced onto a term mortgage once trade stabilises. Where the buyer is VAT-registered on an opted property we can arrange a VAT loan to bridge the reclaim, and asset finance for the fixtures, fit-out and plant.
The market backdrop is firm. UK hotel investment ran at about £5.0bn in 2025, above the 10-year average with single-asset deals 85% of volume (Savills, 2025), and prime London leased hotels priced at 4.50 to 4.75% net initial yield with prime regional 5.25% and above (Knight Frank, October 2025). A record leisure market underpins the trade, with 43.4m inbound visits and £33.7bn of visitor spend in 2025 (VisitBritain). We package the accounts, the trade and the operator so a lender can price the going-concern risk quickly.
What we fund
- Freehold hotel purchases by an owner-occupier or investor
- Refinancing an existing hotel loan onto keener term debt
- Refurbishment, rebrand or reposition of a trading hotel
- New-build hotels and office or other conversions to hotel use
- Leasehold hotel acquisitions and management-agreement trades
- Portfolio and multi-asset hotel refinancing
Indicative terms
- Loan to valueIndicative ~60 to 70% of going-concern value
- Basis of valuationGoing concern on fair maintainable trade (EBITDA)
- TermCommercial mortgage typically to 20 or 25 years
- Debt service coverSized on the DSCR the maintainable trade supports
- Bridging and developmentFor acquisition, reposition or new-build
- Key testsOccupancy, ADR, RevPAR, operator, brand, tenure
- ExitTerm refinance once trade is proven, or sale
Indicative only. Terms vary by lender, asset and scheme and are not an offer of finance.
How we arrange hotel finance across the lifecycle
We arrange hotel finance around where the asset sits in its lifecycle and pre-agree the exit. For a purchase or a refinance we place a commercial mortgage sized indicatively at around 60 to 70% of going-concern value, on a term typically to 20 or 25 years, with amortisation set by the DSCR the fair maintainable trade supports. For an acquisition that needs work, or a reposition or rebrand, we arrange a bridging loan or refurbishment facility across the works and the trade build, then refinance onto a term mortgage once the new trade is proven. For a new-build or major conversion we arrange development finance drawn in stages against a monitoring surveyor, with a term take-out once the hotel opens and stabilises. Where the deal is VAT-registered we can bridge the reclaim with a VAT loan, and fund fixtures, fit-out and plant with asset finance. We frame every figure as indicative and never as an offer or a quoted rate; the terms depend on the trade, the operator and the tenure, and we run the market to find them.
How a lender underwrites a hotel
A lender underwrites a hotel as a going concern, not as bricks and mortar. It works to the fair maintainable trade, the sustainable EBITDA a competent operator would achieve across a full year rather than a single strong season, and capitalises it at a market multiple to reach a going-concern value. It reads occupancy, ADR and RevPAR, the flow-through to fair maintainable operating profit after payroll, and the durability of the brand, franchise or management agreement, then sizes loan to value against that value and tests the DSCR. Tenure matters: a freehold owner-occupier trade carries the loan directly, a leasehold or tenanted hotel is read through the lease and covenant, and goodwill and trade fixtures are weighed alongside the property. Specialist hospitality lenders, challenger banks and debt funds compete here. As an arranger with no exclusive tie, we present the accounts and the operator to the lenders most comfortable with hotel trade rather than steering every case to one name.
Refinancing or exiting a hotel loan
Hotel finance is arranged with the exit in view. A bridging or development facility is repaid by a refinance onto a long-term commercial mortgage once the trade is proven, or by a sale into an investment market where prime London leased hotels price at 4.50 to 4.75% net initial yield and prime regional at 5.25% and above (Knight Frank, October 2025). A term mortgage is refinanced or remortgaged at maturity, or when improved trade or falling rates support keener terms or a release of equity for the next project. UK hotel investment ran at about £5.0bn in 2025, above the 10-year average (Savills, 2025), and the sector's second-half comeback on leisure and wellness demand supports both the refinance and the sale. We structure the facility so the route out is credible from the day it is drawn.
Finance that suits this asset class
- Commercial mortgagesLong-term debt on a trading hotel, sized on going-concern value and DSCR.
- Bridging financeShort-dated funding for an acquisition, reposition or rebrand ahead of a term refinance.
- Development financeStaged funding for a new-build hotel or a major conversion.
- RefinancingReplaces existing hotel debt or releases equity from proven trade.
- VAT loansBridges the VAT reclaim on an opted hotel purchase.
Stabilising hotels?
A view on fundability within one working day.
What drives a hotel's numbers
A hotel is a trading business, so a lender values it as a going concern on its fair maintainable trade, the sustainable EBITDA a reasonably efficient operator would achieve, capitalised at a market multiple. The decisive variables are occupancy, average daily rate and the RevPAR they produce, the flow-through to operating profit after payroll and the rising business-rates and wage costs that are squeezing margins, and the brand or franchise behind the trade. The market backdrop is firm: UK hotel occupancy held near 76.1% in 2025 (STR, 2025), regional RevPAR closed the year around £79 (HotStats, 2025), and prime London leased hotels priced at 4.50 to 4.75% net initial yield, regional 5.25%+ (Knight Frank, October 2025). We model maintainable trade across a full year, not a single strong season, because that is what a lender capitalises and a valuer signs off.
Indicative hotel finance across the lifecycle
Indicatively we arrange hotel commercial mortgages to around 60 to 70% of going-concern value, sized on the debt service cover the maintainable EBITDA supports over terms typically to 20 or 25 years. For an acquisition or a reposition we arrange bridging to buy time to prove a new trade, and development finance drawn against a monitoring surveyor for a new-build or major conversion, then a refinance onto a term mortgage once trade stabilises. Prime leased hotel yields near 4.50 to 4.75% in London and 5.25%+ regionally (Knight Frank, October 2025) anchor the investment value and the exit. These are market-typical, indicative structures and never an offer or a quoted rate; the terms depend on the trade, the operator and the tenure, and we run the market to find them.
Frequently asked questions
What does hotel finance do?
Hotel finance funds the purchase, refinance, refurbishment or development of a hotel, and it does so against the business as much as the building. Because a hotel is a trading asset, a lender underwrites it as a going concern on its fair maintainable trade, the sustainable EBITDA a competent operator would produce, and sizes the loan on the debt service that trade covers. We arrange the commercial mortgage, bridging or development finance that suits where the hotel sits in its lifecycle, and pre-agree the exit. We are an arranger, not a lender.
How many years is a typical hotel loan?
A hotel commercial mortgage typically runs to 20 or 25 years, with amortisation set by the DSCR the fair maintainable trade supports rather than a fixed schedule. Bridging and development facilities are much shorter, usually months to around two years, because they are repaid from a defined exit such as a refinance once the trade is proven or a completed development. We frame terms as indicative only; the actual term depends on the trade, the operator and the tenure.
How much can I borrow to buy a hotel?
Borrowing on a hotel is sized against going-concern value and the DSCR the fair maintainable trade supports, with leverage indicatively around 60 to 70% of going-concern value, so the balance is funded as deposit and equity. A strong, well-documented trade on a freehold owner-occupied basis borrows more comfortably than a thin or seasonal trade, and a leasehold or heavily goodwill-dependent hotel less. We frame leverage as indicative and never as an offer; lenders size it on the maintainable EBITDA, not a headline percentage.
How to prepare a financial plan for a hotel?
A lender wants to see the fair maintainable trade evidenced: two to three years of accounts, occupancy, ADR and RevPAR, a payroll and cost model that flows through to EBITDA and fair maintainable operating profit, and the brand, franchise or management arrangement behind it. A credible forecast, the tenure position (freehold, leasehold or tenanted) and a realistic owner's remuneration complete the picture. We help package this into the form a hotel lender underwrites, so the going-concern case is clear before it goes out.
Can you get a commercial mortgage on a hotel?
Yes. A trading hotel is financed on a commercial mortgage sized against going-concern value and the DSCR the fair maintainable trade supports, typically to around 60 to 70% loan to value over a 20 to 25 year term. It is unregulated commercial lending against the property and the business, not a regulated residential mortgage. We run specialist hospitality lenders, challenger banks and debt funds to place the mortgage on the keenest available terms.
What is fair maintainable trade?
Fair maintainable trade, or FMT, is the level of sustainable trade a reasonably efficient operator would achieve from a hotel, from which a valuer derives the fair maintainable operating profit, or FMOP, that a going-concern valuation capitalises. It is the backbone of how a hotel is valued and lent against, because it strips out an owner's under- or over-trading and gives the lender a defensible, repeatable EBITDA. Every hotel loan we arrange is sized back to it.
Stabilising hotels?
Tell us about the asset and the income plan and we will come back with a view on fundability and likely terms.