Hotel bridging finance and loans

Who can borrow and what lenders look for

A hotel bridging loan is judged more flexibly than a term mortgage on the property and the trading position, because the loan is short term and security-led, but lenders are strict on the exit. A bridging loan can be advanced on a hotel that is closed, mid-refurbishment, or trading below its potential, where a term lender would decline. What a bridging lender needs is a clear charge over a saleable, financeable asset and a credible repayment route within the term. For an operator, that route is usually a refinance onto a commercial mortgage once the hotel is trading at a level a term lender will support; for an investor, it can be a sale. The lender will check the borrower's experience and the logic of the deal, but it is not underwriting years of trading accounts the way a term mortgage demands, which is what lets a bridging loan move at the pace a hotel purchase sometimes needs. We make sure the exit is real and arranged before the bridge draws, so you are never left holding a bridging loan with no way out.

How much you can borrow

Bridging lenders advance up to around 70 percent LTV of the property value, with the figure set by the valuation basis and the quality of the exit. Where the hotel needs work, the loan may be sized against the current value with a further tranche released for the refurbishment, or against the value once the works are complete. Because the loan is short term and interest can be retained or rolled up, the net amount you receive at completion is the gross loan less retained interest and fees, so it pays to size the facility against what you actually need rather than the maximum available. Where the works are substantial, some lenders will lend against the gross development value the refurbished hotel will reach and release the funds in stages against the works, which is closer to a development facility than a simple purchase bridge. We model the loan to value, the retained interest, any staged works tranche and the day-one net advance up front, so there are no surprises at completion and the bridging loan is no larger, and no dearer, than the deal requires.

Rates and costs

Bridging is priced per month, indicatively around 0.75 to 1.30 percent, because it is short-term, fast and flexible, so it is dearer than a term mortgage and should be used only for as long as you need it. Interest is usually retained or rolled up rather than paid monthly, so it does not strain cashflow during the term. Expect a lender arrangement fee of around 1 to 2 percent, a valuation fee, legal costs for both sides, and sometimes an exit fee. The single biggest cost lever is time: a bridge held for three months costs a fraction of one held for eighteen, so lining up the exit early matters. We disclose our broker fee in writing, quote the all-in cost over the expected term, and never claim an exclusive tie to any lender.

Bridging, acquisition finance or development finance

Bridging is the right product when you need to move faster than a term lender can, or when the hotel cannot yet be financed on a term mortgage because it is closed, mid-refurbishment or trading below the level a term lender wants to see. It is short-term money and is always meant to be repaid by something cheaper: a commercial mortgage once the hotel stabilises, or a sale. If the hotel is already trading well and you have time, hotel acquisition finance is cheaper and the right first port of call. If you are building, extending or converting, development finance is the better structure, and where the works are heavy enough a refurbishment facility may sit between the two. The classic hotel sequence is to bridge to buy or reposition quickly, then refinance onto a long-term commercial mortgage once the hotel is trading at a level a term lender will support. The single discipline that makes bridging work is planning the exit before the bridge draws: a bridge with a confirmed refinance or sale behind it is a cheap, fast tool, while a bridge taken without an exit is the most expensive way to own a hotel. We plan that exit at the outset so the bridge does its job and then steps aside.