Quick summary

If you’re buying, refinancing or refurbishing a hotel, lenders will usually take a first legal mortgage over the property and often require company-level security (debenture, fixed & floating charges) plus some form of personal guarantee from directors or major shareholders. Other common requirements include assignment of income, security over furniture, fixtures & equipment (FF&E), cross-collateralisation for portfolios and reporting covenants such as DSCR (debt service cover ratio). Want a lender opinion? Get a Free Eligibility Check.

At-a-glance: Typical security & guarantee checklist

Here’s what lenders commonly ask for on hotel facilities (loans from around £10,000 upwards):

• First charge mortgage over the hotel freehold or long leasehold
• Fixed charge over key assets and floating charge over company assets (debenture)
• Director(s) personal guarantees (unlimited, capped or time-limited)
• Security over FF&E or assignment for asset finance
• Cross-collateralisation for multi-property borrowers
• Assignment of revenue (room bookings, corporate blocks) and bank account control
• Insurance assignments and lender‑approved policies

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Why lenders require security for hotels

Lenders ask for security because hotels are capital‑intensive and can show volatile cashflows. Security helps convert that value into recoverable assets if trading falls short.

Key factors lenders look at:

• Location, demand and market occupancy
• Valuation and loan‑to‑value (LTV)
• Consistent cashflow and historical trading
• Strength of management and operator agreements
• Condition of the asset and planned capex

Lender appetite varies: high‑street banks favour lower LTVs and strong covenants; specialist hotel lenders and alternative/bridge lenders can be more flexible but may ask for stronger security or higher rates.

Typical types of security for hotel loans

Below are the common security forms you should expect and why each matters.

First legal mortgage / charge over freehold or long leasehold

The first charge over the property is usually the primary security for term loans and mortgages. Traditional lenders commonly lend up to 60–75% LTV depending on hotel performance; specialist lenders may go higher if metrics are strong or the borrower pays a premium.

Expect RICS valuations and a lender’s survey (Open Market Value or Existing Use). Lenders will check lease length and any head‑lease obligations for leasehold sites.

Fixed and floating charges / debentures

Corporate borrowers commonly grant a debenture: a fixed charge over major assets (premises, significant plant) and a floating charge over circulating assets (stock, receivables). Debentures make it simpler for a lender to take combined security across multiple facilities.

Asset-based security (furniture, FF&E, plant & equipment)

Furniture, fittings & equipment (FF&E) can be taken as specific security for asset finance or used by specialist lenders as additional cover. The distinction between chattels and fixtures matters legally — fixtures usually form part of the property security, chattels may need separate schedules and registrations.

Cross-collateralisation and portfolio security

If you own several properties, lenders often require cross‑collateralisation or pooled security so loans are secured across the portfolio. This lowers LTV risk for the lender but increases borrower exposure across assets.

Charge over business assets & assignment of income

Lenders frequently ask for assignment of revenues — room takings, corporate contracts, franchise fees — and may require a charge on booking platform receipts or a direct debit arrangement. Control of a designated bank account or sweeping arrangements are common for working capital facilities.

Indicative LTV ranges by lender type

Personal guarantees — what to expect

Personal guarantees are common for hotels — particularly for owner‑managed groups, SMEs, management buy‑ins or where company security or cashflow is insufficient on its own.

Who is typically asked to guarantee?

Directors, major shareholders, beneficial owners and sometimes parent companies or SPVs (special purpose vehicles) are typical guarantors.

Types of guarantees

• Unlimited personal guarantee — full personal liability for outstanding debt after enforcement of security.
• Limited/capped guarantee — personal liability capped at a fixed sum or proportion (e.g., £200,000 or X% of facility).
• Time-limited / sunset guarantees — personal exposure reduces or ends after a period or upon meeting certain triggers (e.g., after 24 months trading).
• Pro rata guarantees — split liability proportionally across multiple guarantors.
• Deed of Guarantee / Guarantor Support Agreement — may include additional covenants (limits on drawings, sale of assets, minimum reserves).

When lenders may waive or limit guarantees

Lenders may limit or waive personal guarantees where there is: very low LTV, strong institutional borrowing history, a corporate parent providing support, or exceptionally robust cashflow forecasts and covenants. Specialist lenders can sometimes offer limited guarantees as part of a negotiated package.

Practical implications for directors

Signing a guarantee affects personal credit, future borrowing and asset exposure. Directors should obtain independent legal advice and consider negotiating caps, indemnity periods or sunset clauses.

Common lender conditions, covenants & insurance requirements

• Financial covenants — DSCR, minimum NAV, gearing ratios and interest cover.
• Performance covenants — minimum occupancy or RevPAR triggers in some cases.
• Reporting — annual accounts, interim management accounts, occupancy and revenue reports.
• Capex and maintenance reserves — lenders may require an escrow or reserve for refurbishment.
• Insurance — landlord’s/building insurance with lender as interested party, business interruption and public liability cover.
• Enforcement rights — rights to appoint a receiver or step in under management agreements if covenants are breached.

How to prepare to reduce security & guarantee burden

Practical steps to improve terms and limit personal exposure:

• Strengthen trading accounts and provide 3–5 year cashflow projections and RevPAR forecasts.
• Lower LTV before refinancing where possible — inject equity or use alternative collateral.
• Offer corporate rather than personal security where possible (parent company support).
• Negotiate limited guarantees, caps, sunset clauses and carve‑outs for family home or pension assets.
• Use a specialist hotel finance broker to run a competitive process and target lenders that accept limited guarantees.

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Typical examples & scenarios

Illustrative (anonymised) examples to bring the above to life:

• Regional 30-room purchase: first charge + capped director PG of £200k; 65% LTV; lender requires 12 months trading history.
• Boutique city hotel refurbishment: staged development facility, debenture over company, assignment of booking income, limited PG during construction period only.
• Multi-property portfolio refinance: cross-collateralisation across three hotels, parent company guarantee instead of multiple director PGs; lender requires pooled covenant reporting.

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FAQ

What collateral do lenders usually require for hotel loans?

Primary collateral is normally a first legal mortgage over the hotel (freehold or long lease). Lenders often add company debentures, fixed/floating charges, security over FF&E and assignment of revenues depending on loan type and LTV.

Do I always have to give a personal guarantee for a hotel loan?

Not always, but personal guarantees are common—particularly for owner-operated hotels and SME borrowers. Guarantees can be unlimited, capped or time-limited and are negotiable.

What is a debenture and why do hotels use it?

A debenture is an omnibus security document that registers fixed and floating charges over company assets. It simplifies enforcement and is typical where multiple facilities are in place.

How can I minimise my personal guarantee?

Reduce LTV, strengthen company cashflow, offer corporate or portfolio security, seek parent company support, or negotiate a limited/sunset guarantee. A specialist broker can help find lenders willing to limit personal exposure.

What LTVs are typical for hotel mortgages?

Indicative ranges: 50–70% for mainstream banks, 60–80% for specialist lenders, and up to 85% for short-term or bridging facilities (with higher costs). Exact LTV depends on valuation, location and trading performance.

Will lenders accept franchise or management contracts as security?

Not as primary collateral, but lenders will review franchise and management agreements closely as they affect revenue stability. Lenders may require assignment or direct notification clauses in these contracts.

If you want personalised answers for your hotel or portfolio, get a free eligibility check — it’s quick and no obligation.

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Related resources

Suggested pages for further reading and support:

• Hotels Business Loans — sector-specific finance options and guides.
• Commercial property loans and refinancing guides
• Asset finance and FF&E lending explained

For valuation best practice consult RICS guidance and for general business finance information see gov.uk resources.

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