One of the industries that COVID-19 has dealt a significant blow is the hotel industry. Travel bans and cancellations of important events led to the crippling of the hospitality sector during the early days of the pandemic. However, investors are now asking what hotel financing looks like in a pandemic. Even though interest rates have been cut, resulting in low mortgage rates, it is still hard to predict when one will get a return on hotel investment.
Steps Borrowers are Taking to Weather the Pandemic Financially
When occupancy dropped, borrowers decided to request deferrals of interest and principal payments. The request was logical as they needed to cover other costs like taxes and insurance despite a decrease in revenue. Lenders have the option of accepting or denying those requests. However, denying borrowers such a request is risking default in the end if occupancy keeps going down. The practical solution has been for borrowers to work with lenders. It is in the best interest of a borrower seeking a deferral to review the credit terms. They should also explore various financial avenues if they want to have an easy time borrowing money.
How Lenders are Reacting Amid COVID-19
Amidst the pandemic, lenders have been willing to work with transparent and proactive borrowers. A professional, direct, and communicative borrower is valuable during the pandemic. This is especially important when a borrower demonstrates they are doing their best and making intelligent financial choices.
Lenders need to find smart ways to work with borrowers. As much as things like debt restructuring and deferred or reduced payments are not ideal, being too rigid during tough times can cause one to lose valuable relationships. A borrower who is working hard to bounce back despite tough times is a great asset.
Exploring Various Hotel Financing Options
Some hotels are working with private and government programs that convert rooms into short-term residences for homeless people and healthcare workers. However, such an option is temporary, and a hotel owner has to explore other hotel financing terms like;
Deferring/ delaying SBA loan payments- borrowers can defer payments for a period of up to six months
Delaying microloan payments- lenders can also allow for deferment for six months.
Another option is the SBA disaster loan assistance that aims to cushion business owners against challenging economic times.
Borrowers do not have to restrict borrowing to SBA loans only. If you are a hotel owner looking for hotel financing, contact First Source Capital today. You will get the help you need to save your business from shutting down amidst a pandemic.