Cliffport Business Capital, a small-business funding service in Galveston, TX, walks through financing a boutique hotel: splitting the property, the operating business and the furnishings into separate pieces, what lenders review for each, a worked purchase structure, and Galveston County, TX lodging counts.
Step One: Separate the Three Layers
The building is real estate, financed with commercial property lending. The operating business (bookings, brand, contracts) has value beyond the building. The furniture, fixtures and equipment wear out on a five-to-ten-year cycle. Lenders treat each differently, so the plan should too.
How to Finance a Hotel Purchase: A Layered Structure
- A commercial real-estate loan for the property
- A down payment from the buyer
- Sometimes, a seller note for part of the price
- A business term loan or FF&E financing for the furnishings and any planned renovation
- A working capital reserve for the first months
This hotel financing structure keeps the long-lived asset on long terms and the short-lived assets on short ones.
How to Get a Loan to Buy a Hotel: What Lenders Read
- Three years of revenue, occupancy and average daily rate reports
- Profit and loss statements and tax returns
- Property condition and environmental reports
- Any franchise or management agreement
- Hotel tax filings, current
- The buyer's hospitality experience and plan
A boutique property without a franchise may lean on the buyer's experience and the property's own history.
A Worked Example (Illustrative)
A 20-room boutique property is priced at $2.4 million. Suppose the buyer puts down 20 percent ($480,000), the seller carries a $240,000 note, and a lender funds the remaining $1.68 million against the property. A separate $150,000 FF&E loan refreshes the rooms.
Run each payment through the hotel loan calculator with your own quoted rates, then compare the total with the property's net operating income in its slowest recent months, not its average.
Don't Forget Hotel Occupancy Tax
Hotel occupancy tax filings are one record a lender may ask to see. Confirm the rules and any amounts owed with each tax office, including whether the seller has any unpaid tax. See the hotel occupancy tax guide.
Lodging in Galveston County, TX
Galveston County, TX had 91 traveler accommodation employers in 2023, 13 of them in ZIP 77550, and 36.3% with fewer than five employees (County Business Patterns 2023; ZIP Code Business Patterns 2023). More on funding these businesses is on the hotels and motels page; county data is on the Galveston, TX data page. More articles are on the blog.
By Cliffport Business Capital · Updated