It is still a tight and volatile credit market. How, then, can you increase your chances of obtaining a loan for your hotel franchise?
Lenders are less interested in business strategy and more interested in training and other practices. Important information to provide to loan underwriters includes:
- Growth and growth prospects
- Training provided to franchisees, including management training and specifics about the training
- Co-op advertising practices
- Location and access to business areas and airports
- Parking capacity
- History of the hotels’ operations and brand identity
One intriguing option for hotel franchisors is the Small Business Administration (SBA) guaranteed lending program. In the last 10 years, 4,978 SBA 7(1) and 504 loans have been approved to the hotel industry.
While it may not seem like it at the outset, hotel franchisors are often in a good position when it comes to loan applications. In fact, franchised hotels received more than 47 percent of all SBA loans granted to hotels between March 2011 and March 2012. Lending to franchise businesses is growing, increasing 3.18 percent in one year alone.
You must be on the SBA’s Franchise Registry in order to obtain an SBA loan. As an added bonus, franchises on the registry have already been pre-screened for loans, which can help a franchise receive any loan, not just SBA loans.
No matter how much your franchise is growing and how reputable your name, obtaining a franchise loan can be a challenging process. With the right information at your disposal and the help of an experienced franchise lawyer, however, the process can put your business on the path toward future success.
Source: Hotel News Now, “What lenders want from hotel franchisors,” Bob Coleman, Oct. 9, 2012