The hospitality sector is flourishing day by day. Many good hotel projects in India seek an excellent opportunity to finance their hotel business. If you have a great hotel setup idea, you can give it the shape of reality by choosing the best hotel business loan companies in India, you don’t need to complete the hectic application forms when applying for a hotel business loan. Moreover, you don’t need to submit many documents with the application form.
If you are thinking that the procedure of how to get loan for hotel business is complicated, then, I should tell you that the procedure of getting a loan for your hotel is easy. You will get it at attractive interest rates. In this way, you will get good finance for your hotel.
The finance companies not only finance the new hotel projects but also give finance if your hotel requires renovation and expansion. In this way, you can say that all your financial difficulties for setting up luxurious difficulties can be handled by the business loans smartly. Consequently, your customers will get luxurious amenities in your hotel and your business will get a high market profit in the long run. Read this article to know how to get loan for hotel business in India.
Eligibility criteria & Mandatory documents Required For Hotel Business Loan in India
Some terms and conditions are required to be fulfilled If you are seeking a business loan in India:
- You should be at least 22 years old. If you are a young entrepreneur (below 22 years), you can’t apply for a loan. You should have a business partner who is 22 years old or above to apply for a hotel business loan.
- Your firm has filed at least one year of income tax returns.
- Your firm should be functioning for at least one year.
Whether you are asked to submit collateral or not, you should be asked to attest mandatory documents with your application form. The following documents should be attested with the loan application form:
- ID proof: Aadhar card, PAN card, Voter ID card, and passport
- Address proof: Post-paid phone bill, Voter ID card, and Aadhar card
- Age proof: PAN card and passport
- Bank details: Canceled checks, bank passbook front page copy, and bank statements of six months
- Signature proof: PAN card and passport
Why should you get a hotel loan?
Nowadays, approving a business loan when setting up a new business has become a very common thing across the country. You are required to get a hotel loan for various purposes. Look at the following reasons for applying a hotel loan:
- Renovation and expansion your hotel building
- Proposal of new restaurant
- Fulfilling future projections
- Adding advanced security in the hotel
- For fulfilling small needs like
- Food and beverage items
- Hotel clean in equipment
- Music and entertainment appliances
- Sales and Marketing
- Employees salary
- Gardening expenditure
- Repairing electrical appliances
- Replacing furniture
- Adding more amenities
How can you apply online for a hotel loan business?
You don’t need to do a lot of paperwork when you are applying for a hotel business loan. It is easier than the offline procedure. You don’t need to fulfill many formalities and attest to many documents with the application form.
- Apply online
First of all, you should visit the bank’s or financial institution’s website. Then, you have to go to the section of online application. You have to complete all the information given in the application form.
- Submit the required documents
All essential documents should be submitted with the application form. In this list, the hotel’s revenue will be the most essential one as your hotel loan amount depends on it.
- Loan approval
The online application is reviewed within one day. Your loan will be approved on that day and you have to wait for 72 hours to get the loan.
What are the features and benefits of a hotel loan?
A huge capital is required when you are seeking a hotel loan. Hence, it is a profitable option for the entrepreneurs. Look at the following benefits that you will get from the hotel loan:
- Cash flow: No business is possible without the cash flow. If you are talking about the hotel business, you need more cash flow in operation than the other business options.
- Collateral not compulsory: The collateral is not compulsory when you are applying for a hotel loan. You can get approval easily.
- Choose repayment limit: You get the facility of choosing the option of repayment limit.
What are the different types of hotel loans
Capital is required to finance the hotel business. You can get the loan on the basis of your requirement and repayment capacity. There are many types of hotel loans that are financing the hotel business without any ado. You can increase or decrease the repayment limit on the basis of your repayment capacity. Look at the following different types of hotel loans:
- Refinancing the loan to reduce the obligation
Suppose that you have got a loan of 20 crores. Now, you are unable to repay this loan within a limited period because you have to pay 4 crores with the interest rate annually for 5 years. You can refinance your repayment capacity by refinancing the business loan. Consequently, your loan repayment time limit will be extended. You will be able to repay the same loan over an extended period of time. After refinancing the loan for 10 years, you have to pay 2 crores annually along with a lower interest rate.
This is a smart hotel business type that can be repaid to the finance company as per your capacity. By refinancing It, you can rid yourself of the pressurized burden of paying a loan.This is a great option when the profits that your earning from the hotel business go down.
2. Consolidation of multiple loans
Suppose that you have a network of hotel businesses. You have got different loans for your hotel, restaurant, and cafes, In this case, it is natural that you will forget when to deposit the installment of repaying the loan. It can be a headache to deposit the loan installments on different dates. Therefore, it is given a facility to the borrowers that they can consolidate their all hotel business loans. In this way, they will be able to deposit their annual loan installment easily. There is no worry about managing different dates for repaying the loan amount.
- Unsecured loans
If you are sanctioning your business loan amount from any government financial institution or bank, you will get a loan without the requirements of collateral. You will get the amount from INR 25 lakh to 3 crores on applying for a government loan for the hotel business. But you have to fulfill some requirements to get unsecured loans like your firm should be in operation for at least three years. You will get such loans between five and ten days. This banking information varies from bank to bank.
Which steps should I consider when applying for a hotel loan?
The following steps should be considered when applying for a hotel loan:
#1. Understand your needs
You should understand what your financial objectives are and what your financial capability is. You have to enlist all those amenities expenditure that you want to give your customers in the hotel. If you are looking for a hotel construction loan, you have to plan how much you need it. For renovation and expansion, loans are given to the borrowers by the companies.
#2. Choose the best money lender
When you are looking for where you should borrow a loan for your business at affordable interest rates, you should choose the best money lender. You will get many options at attractive interest rates. Therefore, intense research on this matter will help you the most.
Banks provide loans for businesses at attractive interest rates. You will find interest rates competitive and the repayment method will be flexible. In this way, you will be able to finance your hotel without any ado.
#4. Micro money lenders
Micro money lenders provide short-term loans to borrowers. They are not recognized by the government. The difference between their functioning is that the micro money lenders do not take much time in providing you with the loan amount. If you are getting a loan from them at a lower interest rate, you should get it from them. You will be able to decide on the repayment method flexibly.
#5. Online lenders
NBFCs are also operating in this field. If you want an instant loan option without having the headache of visiting financial institutions, NBFCs are a great option. Your loan amount will be sanctioned within 24 hours. But the interest rate is greater than banks.
#6. Different options
According to your need, purpose, and capacity, you can choose your best option out of many loan options.
- Term loan
A term loan is the most preferred loan that is often asked by borrowers for running a profitable business in the long run. It finances all your requirements for this. This is a one-time loan that can be taken for the short term or the long term. In this type of loan, you will get one more benefit. You can either get a secured or unsecured loan. The secured loan is backed by collateral but the unsecured loan is not backed by collateral.
- Invoice discounting
If you don’t want to face the problem of a lack of cash flow, you should go with the option of invoice discounting. This is a short-term loan option that allows you to have a great cash flow in your business. You need to sell your invoice to the lender for less than the amount of the invoice. Your money lender will buy the invoice from you and you will get compensation for your business. In this way, you will be able to make the payment gradually.
- Credit line
The credit line is a legal agreement that is made between the borrower and the lender. In this legal agreement, the borrower and the lender agree on the maximum amount. The lender promises to give a certain amount of money to the borrower. However, interest rates can go up and down after the loan agreement. You have to repay the loan installments as per the current interest rates.
- Merchant cash advance
You can get an advanced loan based on credit card sales. In this way, you can use this type of loan in any emergency. You will be able to finance your hotel business quickly.
How can you get loan approval early?
You should consider the following tips if you want early loan approval:
- Firstly, you should choose the location of your hotel wisely. If it is at a nice place, your loan will be sanctioned early. It is believed that your hotel business will grow a huge profit.
- The tenure of your hotel should be longer to procure a lower interest rate.
- You can show your future projections (hotel business plan for bank loan) when you are applying for a hotel business loan. This will help you in getting the required amount easily.
- The credit score for your hotel business loan should be above 750.
- Moreover, you can show your personal net worth to get liquidity in your loan.
How can you get a hotel loan for construction?
You can get loan for hotel construction in India easily. Government loan for hotel business named the Paryatan Plus loan scheme was launched by the State Bank of India for various purposes including:
- Renovation, expansion, and modernization of hotels, guest houses, and rest houses
- Purchasing of vehicles
- Construction of coffee houses, spas, restaurants, spas, ice cream parlors, amusement parks, etc.
- Office premises construction, office equipment purchasing
- Buying luxury boats and houseboats.