Bed and breakfast: Financing difficult commercial property projects

Placing difficult cases can be time consuming and frustrating for brokers but there are ways to navigate the complex lender market.

All lenders have their own criteria, risk appetite, compliance and regulatory barriers and some are more flexible than others, especially in the alternative finance sector.

Let’s take the hotel industry. Buying hotels and guest houses requires commercial finance in most cases, unless the buyer intends to live there and occupy at least 40% of the property. In that case they may be eligible for a residential mortgage or they might need a semi-commercial mortgage.

For buyers who are venturing into the bed and breakfast business, for example, there are many considerations that lenders will take into account.

Most lenders will want to see two to three years of accounts of the B&B business that is being bought but what if there are no accounts or if they are very sparse? What if the business has been dormant or the B&B has been empty and needs refurbishment?

Add into this that your client could be a first-time B&B buyer with no experience of running such a business, what are the chances of finding a lender?

On the surface this would seem to be an impossible project to finance but there are lenders who specialise in difficult cases.

The buyer will need to have a robust business plan in place demonstrating how they would turn the business around. This would include, for example, a marketing strategy for bringing in guests and ensuring high occupancy rates, projected income and expenditure over x number of years, profitability projections and staffing requirements.
At Pitch 4 Finance we know which lenders will consider this type of scenario and other areas of difficult finance. We understand what these lenders will want from a buyer so they can make their risk assessment and we can advise on which lender would be most suitable for individual circumstances.

Brokers’ clients don’t necessarily have to give up on their B&B dream. If there are lenders out there who will finance it, our sourcing system along with our lender relationships will find them.