If you want to make the jump into the business world, and you've decided to purchase a hotel, there are quite a few steps you'll need to take before you can realize your dream. Financing a hotel is a major feat that requires a lot of hard work and patience, especially where the paperwork is concerned. Here are just four of the obstacles you'll need to work through while financing a hotel. 

Obtain a Comfort Letter

If you're going to finance a hotel, and you plan to purchase a franchise, you'll need to obtain a comfort letter for your lender. In most cases, franchises are non-transferrable, which means your lender will be out of the loop should you foreclose on your loan. To make sure that doesn't happen, your lender will require that you secure a comfort letter from the franchise, authorizing the transfer of franchise rights to the lender should you default in your loan. Once you've secured the comfort letter, you'll be able to proceed with financing. 

Document Your Hotel Management Agreement

When it comes to financing a hotel, your lender will want to know that you have your hotel management in place. Not only that, but you'll need to have an enforceable hotel management agreement in place, as well. This agreement should include all the terms required for the management of your hotel, plus a secured line of payment for your management team. Failure to have your hotel management agreement in place at the time of financing could delay your loan. 

Secure Your Cash Management System

If you're going to purchase a hotel, you'll need to have your cash management system in place prior to seeking financing for your investment. Hotels generate large amounts of cash, which requires a suitable management system. Your cash management system should outline how all payments will be processed. It will also need to document each bank account that will be used to secure those funds. Your lender will take a close look at your cash management system to ensure that you have a way of protecting the funds that are generated by your hotel.

Have Your Annual Operating Budget in Place

Finally, if you plan to invest in a hotel, and you're seeking financing for your investment, you'll need to have your annual operating budget in place. Your annual operating budget should provide clear and concise details regarding the actual budgetary needs for your hotel.

For more information, contact a hotel financing service today.

Share