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Hotel Fit-outs: Alternative funding comes of age

Hotel Business 10 January 2017
Hotel Fit-outs: Alternative funding comes of age

There can be no other industry where the quality and appropriateness of fixtures and fittings is more important than the hotel sector; yet until recently funders viewed most fixtures as ‘soft assets’ and ‘not appropriate for finance’, says Mark Jones, owner of Fit Out Finance,  a brokerage specialising in funding of fit out projects.

Most of the time, independent hoteliers wouldn’t give much thought to sources of funding; when the need arose they would tend to pursue 2 avenues:
• The mortgage company to mortgage, or remortgage freehold premises.
• Their bank, who would make their own proposals around overdraft, term loan and other facilities probably secured by charges against freehold premises. They might also introduce their finance company who would take a rather limited view on what assets could be funded.

Suppliers of certain ‘preferred assets’ such as catering, EPOS or security would arrange funding through their in-house finance supplier; which didn’t extend the choice very far.

The reality was that this funding was disjointed and left significant gaps where refurbishment or simply rolling improvements had to be funded from already-stretched cashflow; forcing hoteliers to compromise on marketing, training or staff costs to fund refurbishments.

Over the last decade the market awoke to the fact that assets described as ‘soft’ (sometimes literally so, such as carpets and bedding), were financeable – a big step in the right direction but still far from the holistic funding that independent hoteliers needed to compete in an increasingly demanding market, where they could be judged and any shortcomings in decor would be posted on social media and review sites.

Roll forward to 2017 – 8 years after the banking crash – the alternative funding market has grown beyond recognition – there are literally hundreds of providers vying for business. Best of all for hoteliers, the old rules are disappearing – in many cases either one funder or a combination of facilities can be put together in a matter of days covering up to 100% of project costs.

For hotel owners or project managers, getting the funding right can ease the payment process, leaving valuable cash free for business development – look beyond the traditional sources for a holistic solution – the modern way.