Preparing a hotel loan application can be a daunting process, especially for a first-time borrower. One of the most complicated aspects is the lack of any standardized procedures for such applications. Hospitality lenders understandably require a vast amount of information from applicants—such as tax returns, collateral schedules, global real estate holdings, financial data, etc.—but there are no standard forms or formats for providing this information. Some lenders have prepared checklists for applicants, but these lists are paper-based and can be time consuming to customize to the individual applicant, loan type, and loan purpose. Consequently, the loan process often takes several months.
Organizing your information
The process can be made easier by organizing the information most lenders require from borrowers. Experience has taught us that lenders ultimately want data organized into a few select categories:
- Project related—a description of the project (including the brand and whether it is existing or new construction), cost estimates, historical performance, budget projections, and market data;
- Ownership & Management related—profiles of the people sponsoring the project and information about their experience;
- Project guarantors—the personal financial statements and tax returns for those guaranteeing the loan, including their liquidity resources, their other real estate and affiliates, and any other transactions they are involved in; and
- Tax returns—for all businesses involved in the project.
Collecting all this information generally takes more than one person, so it is important to have a team in place to gather it all.
Types of lenders
The information required from applicants often depends on the type of hospitality loan they are applying for. Hospitality borrowers can apply for several types of loans, including:
- A small business loan;
- A bridge loan;
- A conventional loan; and
- A CMBS loan or conduit loan.
Not all hotel loan applications are the same; each lender has its own set of requirements based on loan type and purpose. But the common factor is intense due diligence on the project first, followed by heavy due diligence on the project’s sponsors and guarantors, and then on affiliates and investments. If the borrower owns other hotels, s/he must generally provide information on those assets as well.
Simplifying the process
Years of experience with the manual process of applying for a hospitality loan led the founders of CrediVia to create an online tool that simplifies the loan application process for borrowers and lenders. The CrediVia platform organizes the information typically required from borrowers into distinct “buckets”: 1) the borrower’s personal financial profile; 2) the project profile; and 3) affiliates’ profiles. The intuitive tool walks the borrower through the application process step-by-step, thus removing the guesswork. Borrowers simply input their answers to project specific questions, and the tool begins to collect information in a meaningful way, organizes it, helps the borrower find the right lender, and presents the borrower’s information to the lender network in a format that will make sense to them.
More importantly, CrediVia’s tool adapts to the borrower, the loan purpose and the loan types the borrower is open to. Whether the borrower has one hotel and no other businesses or has ten hotels and multiple other businesses, the system can lead him/her through the application process, organize the necessary information, and find the right lender quickly and easily. Rather than spending months to identify the right lender and apply for a hotel loan, the borrower can complete this once-arduous process in under a month with the CrediVia platform.
Hospitality loans are never simple, nor should they be—hotels are a complicated business. But the application process can be made substantially more efficient and user-friendly, so borrowers can focus on successfully operating their hotels.