Hotel Finance and Hotel Mortgages: How to Fund a Hotel, Guest House or B&B

Written by Jake Stott, Director, Knox Mortgages. Published 25 September 2026. Last reviewed 25 September 2026. Knox Mortgages is a trading style of Fort Advice Bureau, FCA FRN 972730.

What is hotel finance?

Hotel finance is commercial lending secured on a hotel, guest house, bed and breakfast, aparthotel or serviced accommodation business, where the loan is sized on the trading profit of the business as well as the value of the building. It covers four jobs: buying a hotel, refinancing one you already own, funding a refurbishment, and building or converting a property into a hotel. The main products are a commercial mortgage (5 to 25 years), a bridging loan (3 to 24 months) and development finance (12 to 36 months).

The part most first-time buyers miss is that a hotel is not valued like a house. A lender looks at earnings, occupancy and the operator’s track record before it looks at bricks and mortar. That changes what you can borrow, what it costs and how long it takes.

Knox Mortgages is a whole-of-market broker with a dedicated commercial and bridging desk. We place hotel cases with the specialist banks and private lenders who underwrite trading businesses, not the high street desks that decline them on sight. Everything below is what we tell a client on the first call.

Can I get a mortgage to buy a hotel?

Yes. A hotel mortgage is a commercial mortgage secured on the freehold or long leasehold of a hotel, and around 15 UK lenders will consider one. Typical terms are 60% to 70% loan to value, 5 to 25 years, and rates of roughly 6.5% to 9% a year depending on the lender, the loan size and the strength of the accounts. A 30% to 40% deposit is the working assumption for a purchase.

The lender is lending to a business that happens to own property, so it underwrites both. It wants to see two to three years of trading accounts for the hotel you are buying, current management accounts, an operator with relevant experience, and a business plan that shows the debt can be serviced at a stressed interest rate. If any one of those is missing, the deal can still be done, but the loan to value drops and the pricing rises.

The property type also shapes the lender list. A 40-bed branded hotel, a 12-bed guest house and a four-room B&B where the owner lives on site are three different risks and attract three different sets of lenders.

Property type	How lenders treat it	Typical max LTV	Who lends
Trading hotel (owner operated)	Valued as a going concern on EBITDA; loan sized on debt service cover	60% to 70%, up to 75% with strong accounts	Allica, Shawbrook, Cambridge & Counties, InterBay, YBS Commercial, Atom, Together, Santander
Leased or managed hotel (investment)	Valued on the lease and tenant covenant, like any commercial investment	65% to 70%	InterBay, Aldermore, HTB, Cambridge & Counties, Shawbrook
Guest house or B&B (owner lives on site)	Semi-commercial: part business, part home; some lenders cap at the residential value	60% to 70%	Cambridge & Counties, Together, Atom, YBS Commercial
Aparthotel or serviced accommodation	Depends on planning use: C1 (hotel) is commercial, C3 with short lets is holiday let territory	65% to 75%	Commercial lenders for C1; holiday let lenders for C3, see holiday let mortgages
Closed or non-trading hotel	No earnings to lend on, so bridging on bricks and mortar value then refinance once trading	55% to 70% of vacant possession value	Octopus, TAB, Velocity, Albatross, Ortus (stabilisation loans)

How do lenders value a trading hotel?

Lenders value a trading hotel on a going concern basis: a multiple of its sustainable earnings, cross-checked against the bricks and mortar value if the business closed. A RICS valuer will usually report three figures. MV1 is the market value as a fully equipped operational entity trading at its current level. MV2 is the same but assuming the business has been closed for a period and needs reopening. MV3 is the vacant possession value of the empty building, fixtures gone. A lender’s loan to value is normally set on the lower of a percentage of MV1 and a percentage of MV3. Cambridge & Counties, for example, publishes owner-occupier lending at up to 75% of vacant possession value or the lower of 70% of MV1 and 85% of MV3.

The earnings figure that drives MV1 is adjusted net profit, usually called EBITDA (earnings before interest, tax, depreciation and amortisation), with a notional management salary deducted if the owners do not pay themselves a market rate. Valuers apply a multiple to that figure. For independent UK hotels and guest houses the multiple typically sits between 6 and 10 times EBITDA depending on location, condition, brand, and how much of the trade is repeat or corporate.

Three operating metrics feed the number. Occupancy is the percentage of available room nights sold. Average daily rate (ADR) is revenue per room sold. Revenue per available room (RevPAR) is occupancy multiplied by ADR and is the single figure valuers and lenders compare against the local market. A hotel running 62% occupancy at a £120 ADR has a RevPAR of £74.40. If comparable properties in the area run at £95, the lender will ask why, and the answer shapes the valuation.

What is DSCR and how do lenders calculate it on a hotel?

Debt service coverage ratio (DSCR) is the hotel’s adjusted net profit divided by the annual cost of the loan, and most hotel lenders want it at 1.25 times or higher after stressing the interest rate. Allica publishes 130% debt service cover for commercial investment lending. InterBay publishes 125% on net profit or EBITDA for owner-occupier business lending. Atom bank publishes 125% serviceability with the variable rate stressed at margin plus 6.5%. The DSCR test, not the loan to value, is what usually sets the maximum loan on a hotel.

Here is the arithmetic on a 12-bed guest house being bought for £850,000.

Line	Figure	How it is calculated
Room revenue	£325,872	12 rooms x £120 ADR x 365 nights x 62% occupancy
Adjusted net profit (EBITDA after notional manager’s salary)	£110,000	Accounts, add-backs agreed with the valuer
Loan requested	£552,500	65% of £850,000
Annual debt service at 7.5% over 20 years, capital and interest	£53,411	£4,451 a month
DSCR at pay rate	2.06x	£110,000 / £53,411
Annual debt service stressed at 9.5%	£61,800	£5,150 a month
DSCR at stressed rate	1.78x	£110,000 / £61,800
Verdict	Passes 1.25x with room to spare	Loan supportable at 65% LTV

Now change one number. If the accounts only support £60,000 of adjusted net profit, DSCR at the pay rate falls to 1.12x and the case fails. At 1.25x cover the maximum annual debt service is £48,000 (£4,000 a month), which at 7.5% over 20 years supports a loan of about £496,500, or 58% of the price. The buyer needs another £56,000 of deposit, a longer term, a period of interest-only, or a cheaper property. This is why we run the DSCR before we run anything else.

How much deposit do I need for a hotel mortgage?

Plan for a 30% to 40% deposit on a hotel purchase, because most lenders cap at 60% to 70% loan to value and the DSCR test often lands below the LTV cap anyway. On a £1,000,000 hotel that is £300,000 to £400,000 of your own money plus costs. A few lenders will go to 75% on a strong trading business with clean accounts and an experienced operator, and Allica and Cambridge & Counties publish headline maximums of 80% on some commercial owner-occupier lending, but hotel deals rarely reach those figures because the earnings have to support the debt.

The deposit does not all have to be cash. Lenders accept equity in other property as additional security, and a second charge over an unencumbered home or investment property can reduce the cash needed. Director’s loans, gifted deposits between family members (Cambridge & Counties allows them) and vendor deferred consideration, where the seller leaves part of the price in the deal for a period, are all workable if disclosed upfront.

Budget for the costs beyond the deposit: a specialist hotel valuation (£3,000 to £10,000 depending on size), arrangement fees of 1% to 2% of the loan, legal fees on both sides, stamp duty on commercial rates, and working capital for the first trading season. Lenders check that this money exists before they issue an offer.

Which lenders offer hotel mortgages in the UK?

Around 15 UK lenders publish criteria that include hotels, guest houses or trading commercial premises, and they split into specialist banks lending on a term basis and bridging lenders for short-term or non-trading situations. The figures below are the lenders’ own published criteria as held on the Knox lender database, checked September 2026. Rates move; treat them as the shape of each lender’s appetite, not a quote.

Lender	Loan range	Max LTV	Term and pricing (published)	Hotel notes
Allica Bank	£150,000 to £10m	80% headline	Commercial owner-occupier 5 to 25 years; commercial investment and BTL 5-year products; 130% debt service cover on commercial investment	Hotels named in criteria; SME bank; 0.25% rate discount for EPC A to C
Shawbrook	£150,000 to £50m	75%	Commercial trading (owner-occupier) from 7.39%; 2, 3 and 5-year fixes; £150,000 to £2.5m at 75% LTV; structured real estate desk £2.5m to £50m	Whole lifecycle lender: bridging, refurbishment, term
Cambridge & Counties Bank	£150,000 to £15m	75% of VP or lower of 70% MV1 / 85% MV3	Variable or 3 and 5-year fixed; terms to 25 years; trading businesses with 12 months’ accounts considered	VAT loan to 90% combined LTV; manual underwriting; no valuation fee until approved; Scotland minimum £500,000
InterBay (OSB Group)	£125,000 to £25m	75%	Commercial owner-occupier 6.59% to 8.24% on 2 and 5-year fixes; 2 to 30 years; ICR 125% on net profit or EBITDA, business trading 2 years	England and Wales only; clean credit; £145 admin fee
YBS Commercial Mortgages	£250,000 to £20m (owner-occupied £500,000 to £5m)	75%	Circa 6.54% to 6.64% with 2% arrangement fee; 2 and 5-year fixes; minimum 5-year term, to 25 years	No adverse credit in 6 years; credit-backed DIP in 24 hours, offer in 30 days
Atom bank	£100,000 to £10m	75% (70% over £5m)	Fixed to 7 years or variable over base, priced in LTV bands from 40%; amortisation to 25 years; interest-only to 5 years; 125% serviceability; 2% fee	Hotels named in criteria; 10% overpayments without ERC; UK nationals or ILR only
Together	£1m to £5m on the high-value desk	75%	Commercial term from 8.64%, 6 to 30 years; bridging 1 to 12 months	Bespoke underwriting; complex income and adverse credit considered; Knox is onboarded direct
Aldermore	£500,000 to £3m standard, £3m to £100m CRE desk	75%	Margins circa 2.50% to 3.00% over base; 2 to 20 years; 2% arrangement fee	Broker panel currently closed to new members; EPC F and G excluded
Hampshire Trust Bank	£100,000 to £35m	75%	Term from 4.99%, 5 to 30 years; bridging from 0.70% a month, 12 to 24 months	Semi-commercial and commercial; hotels by referral
Santander Corporate & Commercial	£25,001 upwards	Case by case	Fixed or variable over reference rate; up to 25 years; interest-only options and repayment holidays	Owner-occupier trading businesses only, minimum turnover £250,000; hotels named as a sector

Which bridging lenders fund hotels?

Bridging lenders fund hotels when the property is closed, being refurbished, bought at auction, or bought faster than a bank can move, and they lend on the bricks and mortar value rather than the trading figures. Rates run from about 0.72% to 1% a month on commercial security, terms from 3 to 24 months, and the exit is either a sale or a refinance onto one of the term lenders above once the hotel is trading and has 12 months of figures. Full detail on structure and cost is on our commercial bridging loan page, and you can model the interest on the bridging loan calculator.

Lender	Loan range	Max LTV	Published pricing	Term	Hotel notes
Octopus Real Estate (Octopus Capital commercial desk)	£1m to £25m commercial bridging	75%	From circa 0.85% a month	1 to 18 months	Hotels named; vacant and turnaround assets considered; funding possible within 2 weeks
TAB	£100,000 to £5m	70% on commercial	Commercial bridge from 0.72% a month (Bank of England tracker); TAB Mortgage 3 to 5 years from 3.50% over base	To 24 months	Bridge and term under one roof; Scotland mainland covered
Velocity Bridging	£100,000 to £5m	75%	Commercial from 0.80% a month, semi-commercial 0.78%	3 to 24 months	Hotels named; DIP in 1 hour; all credit considered
Albatross Lending	£50,000 to £5m	75% (70% loan to cost)	From 0.85% a month	3 months to 3 years	Hotels named; owner-occupied accepted; England, Wales and Scotland
Proplend	£250,000 to £2.5m	75%	Bridge from 0.85% a month; term from 7.25% a year to 3 years; VAT loans from 0.9% a month	Bridge to 18 months; VAT loan to 120 days	Commercial only; loan offer within 24 hours; bridge or term plus VAT combination
Ortus Secured Finance	£250,000 to £25m	70%	Commercial bridging circa 0.92% a month	6 months to 5 years	Stabilisation loans for hotels not yet at full income; lends on projections; UK-wide including Scotland and NI

Ortus deserves a specific mention. Its stabilisation loan is built for a hotel that has reopened, changed hands or been refurbished and does not yet have the 12 to 24 months of trading a bank wants. It bridges the gap on projections, then the case moves to a term lender.

What do lenders look for from a first-time hotel buyer?

Lenders want a first-time hotel buyer to show relevant experience, a credible business plan, and enough deposit to absorb a lower loan to value, because an untested operator is the single biggest risk in the case. Relevant experience does not have to mean owning a hotel. Managing one, running a pub, restaurant or holiday let business, or a senior hospitality role all count. If you have none of it, three routes work: buy a smaller guest house or B&B where the operational load is manageable, employ an experienced general manager whose CV goes in the application, or partner with an operator who takes equity.

Expect the loan to value to be capped at 55% to 60% for a first-time operator with no hospitality background, rising to 65% to 70% once you can evidence experience. The business plan needs to be specific: local market analysis with comparable RevPAR, a 12-month cash flow that shows the low season, a marketing plan that explains where bookings come from (direct, OTA, corporate, groups), a staffing model, and a capital expenditure schedule for the first three years.

Lenders will also ask what happens if you cannot run the business. A key person plan, and in some cases key person or income protection cover, is part of the answer. We cover this in the commercial mortgage guide as well, and it applies to hotels more than most trades.

Can I get a mortgage on a guest house or bed and breakfast?

Yes. A guest house mortgage or bed and breakfast mortgage is available from the same commercial lenders, but the property is usually treated as semi-commercial because the owner lives on site and part of the building is a home. That has two effects. Some lenders lend on the lower of the residential value and the going concern value, which can cap the loan below what the trading figures support. And because the borrower lives in the property, a few lenders apply consumer protections and underwrite the owners’ personal affordability alongside the business.

The size of the operation matters. A B&B with up to four letting rooms will often be treated as a home with an income, and a handful of residential lenders will look at it on that basis if the owners have other earnings. Five rooms and above, or any property with a bar, restaurant or function trade, is a business and goes to the commercial desk. Planning use also gets checked: a B&B in a house is usually still C3 residential; a guest house or small hotel is C1.

Together, Cambridge & Counties, Atom and YBS Commercial all have appetite here. Loan to value is typically 60% to 70%. Accounts need to separate the business from personal living costs cleanly, which is the point at which many owner-run B&Bs stumble, so get the bookkeeping straight a year before you apply.

Owner-operated or leased: which is easier to finance?

A leased hotel, where a tenant operator pays rent under a long lease, is easier to finance than an owner-operated one because the lender is underwriting a rental income and a tenant covenant rather than your ability to run a hotel. The valuation is an investment valuation based on the lease, and the loan is sized on rental cover, typically 125% to 130% of the interest at a stressed rate. Loan to value of 65% to 70% is normal. The lease length, the strength of the tenant and the rent review pattern drive the outcome. A 20-year lease to a national operator with upward-only reviews is a strong case; a 5-year lease to a start-up is not.

An owner-operated hotel is priced on the business. Loan to value is similar, but the underwriting is heavier and the personal guarantee is expected. The lender wants the operating company and the property company structure explained. Many owners hold the freehold in a property company and run the trade through an operating company that pays rent to it. Cambridge & Counties, Shawbrook and Together all accept opco/propco structures. A managed hotel, where you own the property and pay a management company to run it under a brand or franchise, sits in between: the lender reads the management agreement as closely as the accounts.

What accounts and documents do hotel lenders ask for?

Hotel lenders want two to three years of full accounts for the business, current management accounts to within three months, and the operating data behind them. Here is the standard list we send a client before the first lender conversation.

• Two to three years of filed accounts for the hotel being bought or refinanced, plus the current year’s management accounts
• Monthly occupancy, ADR and RevPAR for at least 24 months, ideally from the property management system
• Room revenue split by channel (direct, online travel agents, corporate, groups) and the commission cost of each
• Payroll schedule and staffing model
• Capital expenditure history and a forward three-year schedule
• Fire risk assessment, premises licence, food hygiene rating and any planning history
• Personal assets and liabilities statement for every guarantor
• Three months of business and personal bank statements
• Business plan with 12-month cash flow, stressed for a 15% fall in revenue
• Proof of deposit and its source
• Details of the opco/propco structure if one is proposed
• CVs of the operators or the general manager

A lender that publishes “12 months’ accounts considered” (Cambridge & Counties) is the exception. Most want the full three years, and every one of them will compare the accounts to the VAT returns.

Can I refinance a hotel to release equity or cut the rate?

Yes. Hotel refinance is one of the most common cases we see, and it works on the same going concern basis as a purchase, so improved trading since you bought the hotel translates directly into a higher valuation and more borrowing. Owners refinance to move off an expensive bridging or development facility, to release capital for a refurbishment or a second property, to replace a lender that has withdrawn from the sector, or simply to cut the rate at the end of a fixed period.

The lender will want the same accounts as on a purchase, and the DSCR test applies in the same way. The advantage is history: three years of your own trading under your own management is the strongest evidence a lender can see. A hotel bought for £850,000 that now earns £150,000 of adjusted net profit might value at £1.2m on a going concern basis, and a 65% loan on that figure is £780,000 against the original £552,500, releasing more than £200,000 before costs.

Watch the timing. Most commercial terms carry early repayment charges in the fixed period, typically 3% in year one stepping down, and some lenders charge a minimum interest period on bridging. Start the refinance conversation 6 months before the current deal ends. Valuation, legals and lender processing on a hotel take 8 to 12 weeks, not the 4 weeks a residential remortgage does.

How do I fund a hotel refurbishment or conversion?

A hotel refurbishment is funded with a refurbishment bridging loan or a development facility, and the property is refinanced onto a commercial mortgage once the work is done and the improved trading shows in the figures. Light works (bedrooms, bathrooms, public areas, no structural change) suit a refurbishment bridge at 0.75% to 1% a month, funded in stages against a schedule of works, with the lender advancing up to 70% to 75% of the current value and often 100% of the build cost. Heavy works, extensions, or converting a building into a hotel are development finance: 60% to 65% of cost or up to 65% to 70% of gross development value, 12 to 36 months, priced at 7.5% to 12% a year. Both products are covered in detail on our refurbishment finance and property development finance pages.

The lender’s real question is the exit. For a trading hotel that stays open through the works, the exit is a refinance on the post-works trading. For a closed hotel or a conversion, there is no trading history, so the exit lender will want a stabilisation period (Ortus) or a bricks and mortar refinance, and the bridging lender wants to see that plan before it lends.

Refurbishment cases also raise the question of whether the hotel keeps trading. Phased works, closing one floor at a time, keep revenue flowing and keep the accounts continuous. A full closure resets the trading history and pushes the refinance out by 12 months. We model both before the client commits.

Can I get development finance to build a new hotel?

Yes, hotel development finance is available for ground-up builds and full conversions, but the lender pool is smaller and the experience bar is higher than for a purchase. Lenders in this space include Octopus Real Estate (development £5m to £30m for experienced developers), Shawbrook’s structured real estate desk, Hampshire Trust Bank (development from 7.50%, 12 to 30 months, up to 70% of GDV), and the private development lenders on our panel. Expect 60% to 65% of total cost, 60% to 70% of GDV, 18 to 36 months, and pricing from 7.5% a year upwards.

Three things decide whether a hotel development gets funded. Planning consent for C1 use must be in place, with any conditions on hours, parking and licensing understood. The developer or the operator needs a track record on a comparable scheme. And there needs to be a pre-agreed exit: either a forward sale to an investor, a franchise or management agreement with a brand that supports the GDV, or a term lender’s indicative terms for the refinance on stabilised trading. Without a named operator, most lenders will not price the scheme.

The full development finance process, costs and lender criteria are on our property development finance page.

How does VAT and Transfer of Going Concern work when buying a hotel?

Buying a trading hotel as a Transfer of Going Concern (TOGC) means no VAT is charged on the purchase price, which on a £1,000,000 hotel saves the buyer finding £200,000 of VAT on completion day. The sale of commercial property is normally exempt from VAT unless the seller has opted to tax, and most hotel owners have opted to tax because their trade is standard-rated. If the seller has opted to tax and the sale is not a TOGC, 20% VAT is added to the price. The buyer can usually reclaim it, but only on the next VAT return, so the cash has to be found first.

To qualify as a TOGC the conditions are strict: the buyer must be VAT registered (or liable to be) by the transfer date, must use the assets to carry on the same kind of business, there must be no significant break in trading, and where the seller has opted to tax, the buyer must also opt to tax and notify HMRC before the relevant date, and confirm to the seller that its option will not be disapplied. Get one of these wrong and HMRC treats the sale as VATable.

If TOGC treatment is not available (a closed hotel, a change of use, an asset-only purchase), a VAT bridging loan covers the 20% for the 30 to 120 days until HMRC repays it. Proplend publishes VAT loans from 0.9% a month to 120 days, and Cambridge & Counties will fund a VAT loan to 90% combined loan to value. Stamp duty is charged on the VAT-inclusive price, which is another reason to secure TOGC treatment. Take VAT advice from your accountant before you exchange; we coordinate with them but do not give tax advice.

Why do hotel finance applications get declined, and what fixes them?

Hotel finance applications get declined for a handful of predictable reasons, and most of them can be fixed before the application goes in rather than after a decline lands on the file.

Reason for decline	What the lender saw	The fix
DSCR below 1.25x	Adjusted net profit does not cover the stressed debt service	Reduce the loan, extend the term, request an interest-only period, add security, or evidence add-backs the valuer will accept
No operator experience	Buyer has never run a hospitality business	Hire a general manager with a CV, take on an operating partner, or start with a smaller property
Trading is falling	Revenue or EBITDA down year on year	Explain the cause with evidence (refurbishment closure, a lost corporate contract since replaced); lenders accept a story with numbers, not a story alone
Valuation short	MV1 came in below the price, or MV3 capped the loan	Renegotiate the price, increase the deposit, or move to a lender that lends on a higher percentage of MV1
Deferred maintenance or compliance failures	Fire risk assessment out of date, no premises licence, poor food hygiene rating	Fix and evidence before valuation; lenders will not fund a business that could be closed by the council
Unclear structure	Opco/propco not explained, lease between them missing or not at market rent	Document the structure and put a proper lease in place before applying
Personal credit issues	Guarantor CCJs, defaults or missed payments	Move to a lender that accepts adverse (Together, Velocity) at a lower LTV, or wait for the entries to age
Seasonality	Cash flow shows losses for 4 months of the year	Show a 24-month cash flow with the low season funded from reserves; some lenders allow seasonal payment profiles
Planning or licensing	Use class not C1, or letting rooms added without consent	Regularise with the council before applying; a certificate of lawful use takes 8 weeks
Weak business plan	Projections with no market evidence	Rebuild around comparable RevPAR data, channel mix and a marketing budget

Half of the declines we see could have been avoided by running the numbers with a broker before the first lender saw the case. A decline sits on the lender’s system and makes the next application harder.

How long does hotel finance take?

Hotel finance takes 8 to 14 weeks from enquiry to completion on a commercial mortgage, and 2 to 4 weeks on a bridging loan, with the specialist valuation and the legal work on the trading business being the two stages that stretch the timeline.

Stage	Commercial mortgage	Bridging loan	What controls the time
Fact find and document pack	3 to 7 days	1 to 3 days	How quickly accounts and trading data are available
Lender selection and decision in principle	2 to 5 days	Same day to 2 days	Velocity DIP in 1 hour; YBS credit-backed DIP in 24 hours
Specialist hotel valuation	2 to 4 weeks	1 to 2 weeks	Valuer availability; hotels need a hospitality-specialist RICS valuer
Credit approval and formal offer	1 to 3 weeks	2 to 5 days	Manual underwriting; larger loans go to credit committee
Legal work	3 to 6 weeks	1 to 2 weeks	Licence transfers, TOGC paperwork, lease review, staff TUPE
Total	8 to 14 weeks	2 to 4 weeks

Two things shorten it. First, having the document pack ready before the lender is chosen: the single biggest delay we see is a buyer chasing a seller for management accounts. Second, instructing solicitors who have done hotel sales before. The premises licence transfer, the TOGC conditions and the TUPE transfer of staff are routine to a specialist and a month of delay to a generalist.

Hotel finance case study: 12-bed guest house in the Lake District

This is an anonymised, illustrative example built from the kind of case our commercial desk places. A couple with eight years of hotel management experience, but no previous ownership, agreed to buy a 12-bedroom guest house in the Lake District for £850,000. The business had three years of accounts showing room revenue of around £326,000 and adjusted net profit of £110,000 after a notional manager’s salary. They had £300,000 available, and the seller wanted to complete before the Easter season.

The first bank they approached declined at 60% loan to value on the grounds that they had never owned a hotel. We ran the DSCR: a £552,500 loan at 65% loan to value cost £53,411 a year at 7.5% over 20 years, giving 2.06x cover at the pay rate and 1.78x at a 9.5% stress. That comfortably cleared the 1.25x every lender on the panel wanted, so the issue was experience, not affordability.

We placed the case with a specialist bank that accepts management experience as operator experience, structured it through a new limited company with both applicants as guarantors, and included a 24-month interest-only period so the first two seasons ran at £3,338 a month rather than £4,451. The purchase completed as a TOGC, so no VAT was charged on the price. The valuation reported MV1 at £870,000 and MV3 at £640,000; the lender’s 65% of MV1 test gave £565,500, above the loan requested. Offer was issued in week seven and the purchase completed in week eleven. The couple kept £45,000 of their cash as working capital for the first low season.

How does Knox arrange hotel finance?

Knox arranges hotel finance by running the DSCR and valuation logic before any lender sees the case, then placing it with the lender whose published criteria actually fit the property, the operator and the structure. We are whole of market with a dedicated commercial and bridging desk, direct relationships with the specialist banks and bridging lenders above, and a lender database that holds every published criteria sheet in the sector.

The process is simple. A 30-minute discovery call establishes the property, the trading figures, your experience and the deposit. Within 48 hours we tell you which lenders will look at it, at what loan to value and roughly what price, and what needs fixing first. If the numbers work, we assemble the document pack, run the lender selection and manage the valuation, offer and legal stages to completion. If they do not work yet, we tell you what would change the answer.

We do not give tax or legal advice; we coordinate with your accountant on VAT and structure and with your solicitor on the TOGC and licence transfer. Related guides: commercial mortgages, commercial bridging loans, refurbishment finance, property development finance, holiday let mortgages and the bridging loan calculator.

Frequently asked questions about hotel finance

How many years is a typical hotel loan?

A typical hotel mortgage runs 15 to 25 years, with most lenders offering terms from 5 years and a few (Together, Hampshire Trust Bank) going to 30. Fixed rate periods are usually 2, 3 or 5 years, with Atom bank fixing for up to 7. Bridging loans for hotels run 3 to 24 months and development facilities 12 to 36 months.

What interest rate will I pay on a hotel mortgage?

Expect roughly 6.5% to 9% a year on a hotel commercial mortgage in 2026, depending on loan to value, loan size and the strength of the accounts. Published examples include YBS Commercial at circa 6.54% to 6.64% with a 2% fee, InterBay owner-occupier at 6.59% to 8.24%, Shawbrook commercial trading from 7.39% and Together from 8.64%. Bridging on hotels runs about 0.72% to 1% a month.

Can I buy a hotel with no experience?

Yes, but the loan to value will be capped at around 55% to 60% and the lender will want to see either an experienced general manager in the business plan, a partner with a hospitality track record, or a smaller property such as a guest house that you can realistically run. Management experience in hotels, pubs, restaurants or holiday lets counts as operator experience with most specialist lenders.

Can I buy a hotel through a limited company?

Yes, and most hotel purchases are structured through a limited company, often with a property company holding the freehold and an operating company running the trade. Lenders including Cambridge & Counties, Shawbrook, Together and InterBay accept opco/propco structures. Directors give personal guarantees, typically for the full loan, and the inter-company lease must be at a market rent.

Is a hotel mortgage regulated by the FCA?

No. A hotel mortgage is a commercial loan to a business and sits outside FCA mortgage regulation, unless a significant part of the property is the borrower’s home, in which case some lenders treat it as a regulated or semi-regulated loan. Knox Mortgages is a trading style of Fort Advice Bureau, which is FCA authorised, and we apply the same standards of advice to commercial cases as to regulated ones.

Can I get a mortgage on a closed or non-trading hotel?

Yes, but not a conventional commercial mortgage, because there are no trading figures to lend on. The route is a bridging loan at 55% to 70% of the vacant possession value from a lender such as Octopus, TAB, Velocity or Albatross, or a stabilisation loan from Ortus that lends on projections, followed by a refinance onto a term lender once the hotel has 12 months of trading.

Does buying a hotel count as a Transfer of Going Concern?

Usually yes, if the hotel is trading at the point of sale, you continue the same business without a significant break, you are VAT registered by completion, and where the seller has opted to tax you opt to tax and notify HMRC before the relevant date. A TOGC means no VAT on the purchase price. If the conditions fail, 20% VAT is charged and a VAT bridging loan covers it until HMRC repays.

How much can I borrow against a hotel?

Most lenders cap a hotel mortgage at 60% to 70% of the going concern value, rising to 75% for a strong trading business with an experienced operator, but the debt service coverage test usually sets the real limit. As a rule the loan cannot exceed the amount that adjusted net profit can cover 1.25 times at a stressed interest rate. On £110,000 of adjusted net profit at 7.5% over 20 years that is a loan of roughly £900,000; on £60,000 it is roughly £496,000.

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Your home may be repossessed if you don’t keep up repayments on your mortgage.

Knox Mortgages is a trading style of Fort Advice Bureau which is regulated and authorised by the FCA to conduct Mortgage and Protection business, FRN: 972730