The Key Factors Lenders Consider for a Hotel Financing Loan in Florida
With a vibrant tourism industry and a constant influx of visitors, a hotel financing loan in Florida has become increasingly attractive to lenders. Nevertheless, lenders consider several factors before approving a loan. These key factors include the property’s revenue per available room (RevPAR), cash flow, and cost basis. To get the best financing options, work with a hotel lender to guide you through the process and secure a loan that meets your needs.
Revenue Per Available Room (RevPAR) Index
The revenue per available room index (RevPAR) is critical in understanding the hotel’s performance and profit. This metric considers the occupancy and average daily rate charged by the property. Lenders ensure that RevPAR metrics are consistent with industry standards and benchmarks to ensure the hotel is a safe investment. Regularly, a higher RevPAR is preferred as it shows increased profitability.
Cash flow is the amount of money circulating in and out of the business during daily operations. Lenders pay close attention to the bank statements to determine if the hotel generates enough money to cover expenses and debts while producing profit. Depending on the lender’s findings, they determine the loan amount for the hotel.
Lenders are interested in the cost basis to make an informed decision regarding hotel financing. Cost basis refers to the expense of rebuilding or replacing the property, including purchase price, land cost, and renovations. These factors determine the collateral value of the loan, allowing hotels to secure financing.