Hotel finance: funding a purchase or refurbishment

Hotel finance is the term for the loans, leases and credit lines used to buy a hotel, refinance one or pay for building and fit-out work. It is not one product. A hotel is a property and a trading business at the same time, so deals are built from several pieces.

The building is usually funded with a commercial mortgage or, where speed matters, a short-term bridging loan. Kitchen equipment, laundry plant and similar items are often funded separately with asset finance. Day-to-day cash needs, such as a quiet winter, are a working capital question rather than a property one.

Hotel finance can pay for the purchase itself, work on the building, equipment and, in some cases, the cash needed to trade through the first months. The table sets out the usual match between purpose and product.

For works on a large scale, our guide to property development finance explains how staged drawdowns work.

Lenders look at whether the business can cover the repayments, what the property is worth and how much of your own money is going in. For a hotel that means more than the building alone.

• Trading record: accounts that show how the hotel has performed through the seasons.
• Affordability: whether profit comfortably covers the repayments, often expressed through ratios such as interest cover.
• The property: a valuation, and the amount borrowed against it, known as loan to value.
• Your experience: whether you have run a hotel or similar business before.
• The plan: what you will change, what it will cost and how it improves income.

Whether you can borrow, and on what terms, depends on the lender’s own criteria and your status. We cannot say what any lender will offer before you apply.

Yes. Buying a trading hotel as a going concern means taking over a live business, and that has its own VAT treatment, while buying an empty building is a plain property purchase.

HMRC’s guidance on the transfer of a business as a going concern says no VAT is chargeable on a sale that meets its conditions. The assets must be capable of forming a separate business in their own right and the buyer must use them to carry on the same kind of business as the seller. The buyer must also be, or become, VAT registered where the seller is.

For land and buildings there is an extra step: the buyer must have opted to tax the property and must tell the seller that their option to tax will not be disapplied. These rules are technical and the consequences of getting them wrong can be costly, so have your solicitor and accountant confirm the position before exchange.

For non-residential or mixed property in England and Northern Ireland, Stamp Duty Land Tax on a freehold purchase is charged in bands, as of October 2026: nothing up to £150,000, 2% on the slice from £150,001 to £250,000 and 5% above £250,000.

The rate applies to each slice, not the whole price. A solicitor will confirm how your property is classified and whether leasehold, mixed-use or other rules apply. Our guide to stamp duty on commercial property covers the detail, and Scotland and Wales have their own taxes.

A refurbishment is usually funded by splitting the work by type: building work from property finance or your own cash, and equipment, furniture and fittings from asset finance that is repaid over the life of the items.

• Light cosmetic work is often paid for from cash flow or a short-term loan.
• Larger works, such as new bedrooms or an extension, may need development finance or a refinance of the existing mortgage with extra borrowing.
• Equipment can be bought on hire purchase or leased, so the cost is spread over its useful life. Our guide to what hire purchase is explains how ownership works.

Build in a contingency, and plan for the rooms that will be out of use. Lost income during the work is a real cost that no equipment loan covers.

The main risk is that income falls short of the repayments, because hotel trading can be seasonal and sensitive to the wider economy while the loan payments stay fixed.

Read how personal guarantees work before you sign. Also check for early repayment charges, arrangement fees and valuation fees, and compare the total cost across offers, not only the headline figure.

The main alternatives are a larger deposit from your own funds, a staged refurbishment paid for from trading profit, a seller willing to defer part of the price, or outside investors. Each has a cost of its own.

If the business is a smaller guest house or pub with accommodation, pub finance and our page for the hospitality sector cover related ground. Compare providers in the lender directory by product type.

Capzy is a credit broker, not a lender, and is paid by the lender. We introduce hospitality businesses to lenders offering property, asset and working capital finance. On our site, asset and property finance runs up to £2m, so a larger hotel purchase may fall outside that range.

You can check your funding options with a soft search that does not affect your credit score. A full application to a lender may involve a hard search, and every offer is subject to status and lender criteria.