Business Line of Credit for Hotels and Motels
A business line of credit lets an independent hotel draw through the slow season, repairs and brand requirements, then pay the balance down when occupancy climbs. For properties with a clear busy and quiet season, a revolving line with interest only on what's drawn usually costs less than an advance repaid at the same rate all year.
How does a hotel use a line of credit across the year?
Carrying the slow season
Winter brings fewer guests for most properties, but payroll, utilities, franchise fees and loan payments continue. A draw in the quiet months gets repaid from summer revenue.
Pre-season preparation
Before the busy season, hotels refresh rooms, hire and train staff and stock supplies. A draw funds the preparation ahead of the revenue it produces.
Replacing equipment that fails
Laundry machines, PTAC units, water heaters and ice machines all break. A draw covers the replacement without a scramble.
A draw for January, worked out
Limit $90,000, price 1.5% monthly on what's outstanding, deposits around $200,000. The owner takes $24,000 to cover January, then pays a third back each month.
| Step | Balance on the line | Cost that month at 1.5% |
|---|---|---|
| Draw in January | $24,000 | $360 |
| After one repayment | $16,000 | $240 |
| After two repayments | $8,000 | $120 |
| Paid back | $0 | $0 |
Roughly $720 in interest, then the full limit is available again. We picked January because BLS job counts for hotels and motels (NAICS 721110) sit lowest then, at 96.7 against 100, versus 103.5 in July.
What do funders look at for a hotel's line?
Bank statements, processor reports, agency payout statements, occupancy and rate reports, business tax returns, credit and the franchise agreement. Properties with long history, steady occupancy and moderate debt qualify for larger limits. An open improvement plan with a large required spend gets close attention.
The mortgage comes first
Most hotels carry a large real estate loan. Funders count that payment when sizing a line, and some loan agreements limit additional debt. Check the loan documents before applying.
How should a hotel manage its line?
Draw in the slow months, repay in the busy ones, and bring the balance to zero at least once a year. A line that never clears reads as permanent debt at renewal. Keep improvement plan spending on renovation financing so it doesn't tie up the line for years.
Quick answers
How much line of credit can a hotel get?
Limits often follow average monthly revenue, adjusted for seasonality, credit, time in business and existing debt, especially the mortgage. Properties with steady occupancy and moderate leverage see larger limits. Funders size conservatively for properties with a large improvement plan still to complete.
Does a hotel's mortgage limit its line of credit?
It can. Funders count the mortgage payment when deciding how much room the property has, and some loan agreements restrict additional borrowing or liens. Reading the loan documents first avoids a conflict, and funders will ask to see them anyway.
Is a line better than an advance for a hotel's slow season?
Usually. A draw in winter repaid from summer revenue costs interest only for those months. An advance repaid at a fixed rate takes the same payment in January as in July, which strains the account exactly when occupancy is lowest.
More for hotels and motels
- Same-day merchant cash advance for hotels and motels
- MCA consolidation for hotels and motels
- Revenue-based financing for hotels and motels
- How funders read hotels and motels
- Business line of credit: how it works
Run your own numbers with the MCA APR calculator.
Want to see what fits an independent hotel like yours?
Tell us your slow months and your open advances, and we'll shop the file with funders whose programs fit. Call 877-FUND-654 with any question. We call you back, usually the same business day, and we always talk with you before we shop your file.