The hotel industry in India is among the major sources of foreign exchange earnings. Over the years, it has emerged as one of the most lucrative and sought-after industries for potential career choices. However, such an industry requires a large amount of money to operate.
In fact, many hotel owners often find themselves cash strapped during the low seasons and struggle to maintain their working capital. To overcome the situation, they often resort to a viable hotel financing option that helps access funds and meet operating expenses smoothly.
Here are 7 top hotel funding options that owners may consider checking out –
- Approach angel investors
Popularly known as angel funder or private investors, they provide a high lump sum amount to businesses in exchange for company shares or convertible debt. While this hotel financing option provides access to substantial capital, owners are burdened with the fear of losing complete control over business operations.
- Opt for an unsecured loan option
Hotel owners can also opt for unsecured financing options like a business loan to meet their capital requirements. Leading financial institutions provide a high loan value of up to Rs.45 lakh for a flexible tenor of up to 84 months.
Nevertheless, before applying for this funding option, hotel owners should check out whether they qualify for the loan or not. Subsequently, they should determine the documents required for a business loan and accompanying terms of repayment to streamline the application process.
In most cases, leading NFBCs like Bajaj Finserv also extend pre-approved offers to their customers to make the borrowing process hassle-free. The said offer is available on multiple funding options, including credit cards, business loans and personal loans. You can check your pre-approved offer online with your name and contact number.
- Consider peer-to-peer financing
This alternative funding method allows hotel owners to raise funds from a group of individuals through an online lending portal. The individuals on the portal mostly provide unsecured loans to businesses in exchange for higher returns. Also, there is rarely any involvement of an intermediary in the arrangement. However, only applicants with a strong credit rating can secure funds through this arrangement.
- Raise funds against the property value
A secured business loan is also a viable option for hotel owners to access capital. They can take advantage of their commercial property and mortgage it to raise funds. Usually, such a funding option offers borrowers a substantial loan amount.
However, the risk of losing ownership of the property also remains present in case borrowers fail to repay the sanctioned secured business loan amount.
Involving another partner into the business is often considered to be a viable means of raising funds. By bringing in a partner or partners, hotel owners can lower their liability and increase the business’s inflow of funds. While it may increase the business’s overall working capital, it will also lower the portion of profits the hotel owner generates from the operation. As per the partnership agreement, the profits generated will be distributed to the new partner/s in a pre-defined percentage.
- Redeem investments
Business owners who have put money into investment options like stocks, mutual funds, ETFs or savings plans may consider redeeming or selling them to access capital. However, one must note that capital gains generated through the redemption of units are subject to taxation. Furthermore, the ROI depends largely on market movement beyond investors’ control and may not work in their favour when they plan to redeem units.
- Consider crowdfunding
In recent years, crowdfunding businesses have become a popular trend. Businesses, usually start-ups, reach out to crowdfunding platforms that bring entrepreneurs and potential investors and make it possible to raise substantial capital. Typically, a crowdfunding programme can be reward, equity or donation-based.
Besides finding the most popular hotel financing option that helps owners cater to their requirements, they should also develop strong financial strategies for proper cash flow management. They should also learn more about how to run a successful hotel business to streamline operations better.