Hospitality businesses are resuming operations following the easing of restrictions due to COVID. The problem is that most of them are struggling to completely make it happen because of one major reason:
A lack of funding.
As you know, hospitality businesses need to take care of several things before they can actually reopen and serve their customers. For starters, they may need to pay overdue rent, water, and electricity bills. They also need to purchase supplies and ensure they can pay their employees’ wages so that they can provide the best service for their customers.
But with the current state of the economy, financial support might be hard to come by.
The good news is that hospitality loans can help you get much-needed funding for your business. And if you know what options are available to you and fulfil their requirements, you won’t have to wait for long before getting access to funds.
In this article, we’ll discuss seven different types of hospitality business loans that you can take advantage of.
Federal and state governments have programs to help businesses thrive as the economy reopens. These loans are tailored toward helping businesses – including hospitality businesses – recover from the effects of the pandemic.
These loan schemes offer favourable rates and conditions that make it easier for businesses to bounce back from the pandemic. However, you need to meet the stipulated requirements to be eligible for the loan.
Small Business Administration (SBA) loans are especially great for hospitality businesses. It’s because you can easily get access to quality, bank-rate financing that you wouldn’t have otherwise gotten without the help of the SBA.
In essence, the SBA agrees to cover your losses in case you default on a repayment, reducing your risk exposure. Whenever you become buoyant financially, you can repay this sum.
Keep in mind that SBA loans require collateral, often have an interest rate of 5% to 8%, and the repayment term ranges between three to twenty-five years. They are often offered in partnership with other lending institutions.
This type of loan is for hospitality business owners who don’t own many assets or don’t want to offer collateral for a loan. Unsecured loans come in handy whenever you need finance in a short period of time.
The legal process for unsecured hospitality loans is usually simpler as there’s no need for valuations. As a result, the approval period can be as fast as 24 hours. The upfront fee for unsecured loans is usually low, too, although this depends on the lender.
But before you take an unsecured loan from a lender, ensure that you understand their terms and conditions first. This way, you can avoid running into legal trouble down the road.
This is a flexible finance type that provides funds for your business on a ‘tap in, tap out’ basis.
Here’s what that means:
The lending body provides you with a lump sum. Then, you withdraw from that sum whenever you need money for something and repay it at a later date. This process can then be repeated as often as you want.
The good thing about a revolving credit facility is that you only need to pay interest on the funds that you withdraw.
This type of financing comes in handy whenever you have to pay emergency bills.
This type of loan is similar to traditional loans, but the repayment structure is quite different. It’s because with a merchant cash advance, you repay the money with percentages of card transactions of your future customers.
Simply put, you pay back the loan using a percentage of the money you make from future sales.
The amount of money you can borrow depends on how many sales you’ve made in the past. As a result, a merchant cash advance is quite flexible to your sales intake. This means that you owe less money if you’re trading less, and vice versa.
You can think of a business credit card as similar to a personal credit card. It’s another traditional way to access funds quickly for your hospitality business. This can help you plug gaps in your cash flow that would otherwise cause serious harm to your business operations.
With a business credit card, you can buy additional stock, boost your working capital and take care of other business costs. You may also get cashback and other credit card rewards depending on your lender.
However, it pays to know what you can do with the funds and what you can’t. Also take note of the repayment terms, the interest rate, and other terms and conditions.
Every business requires certain assets to function optimally. And hospitality businesses are not left out. They need assets like air conditioning, furniture, CCTV, etc. to help ensure great customer service.
Securing these assets often requires substantial financial investments. This is usually hard to come by for most hospitality business owners, especially while they’re financially recovering due to COVID. But with asset finance, you can get the equipment you need to restart operations.
Asset financing lets you purchase assets without having to pay upfront for them since the assets themselves act as the collateral for the purchase. Then, you spread the repayment over an agreed period. When the payments are complete, the asset becomes truly yours.
Every hospitality business needs adequate funds as the economy reopens from the pandemic. It’s something you need to help your business bounce back stronger after being crippled by the impact of COVID on the industry.
The good news is that you now have many options to choose from. And the best way to start is to explore the seven types of loans featured in this article to know which one suits you best.
And if you need further assistance, Unsecured Finance Australia is here to help. Apply online and you can receive your approval within 24 hours.
Find out more by taking a look at our unsecured business loans.