According to the World Travel and Tourism Council (WTTC), India ranks 7th among countries whose GDP sees a large contribution from the travel and tourism sector. This rank has a direct impact on the hospitality business which sees about 6% increase in demand for hotel rooms per year. On the other hand, the supply only increases by about 3% per year.
As per data from the Department of Industrial Policy and Promotion (DIPP), the Indian hotel and tourism industry received FDI of USD 10.90 billion between April 2000 and December 2017.
The hospitality sector has seen a massive growth which has also led to the increase in loans for hotel business in India. Lenders in this country provide financing that specifically aims at those who want to set up or acquire a new hotel. They provide the necessary funding and that too, with attractive terms and conditions.
Before borrowers apply for these business loans, they need to keep the following tips in mind:
- Make sure that the hotel will have a feasible market
Borrowers have to make sure that the hotel for acquisition resides in a market with ample demand which can help the hotel business run successfully.
For example, places in India like Agra, Goa, Aurangabad (Ajanta and Ellora Caves), Jaipur, and Kerala have the highest demand for hotel accommodations.
Acquiring a hotel in these regions will automatically generate profits. However, the competition in such places is also high, and that may restrict revenues. Selecting a place where the room supply is considerably less as compared to the demand can prove beneficial.
- Choose the tenure carefully
The loan tenure may have a direct impact on the interest rates. A loan with a longer tenure will come with lower interest rates and vice versa.
Borrowers also have to make sure that the loan tenure aligns with the monthly or yearly turnover of the hotel. A business must not encounter any financial hindrances that make repaying the loan a burden.
- Present a sound business plan
A business plan will hold significant ground for securing a loan for hotel business in India. The approval rate for financing will go up if a plan answers all the questions a lender might ask.
A business plan for the hotel must include the following:
- Current financial performance.
- Future financial projections.
- Documents that certify that the premises follow all standard guidelines.
- Documents provided after inspection.
Providing all of the above will aid a lender to sanction the business loan without any hassle in between.
- Produce all the necessary documents
Apart from all the hotel documents, borrowers also have to ensure they provide the other necessary ones required for a loan for hotel business in India.
For example, they have to provide KYC documents, their address proof, income tax returns, audited turnovers of existing businesses, bank account statements, etc.
- Have a healthy credit score
Financial institutions require customers to have a credit score of at least 750 for hotel loans. In case the loan is unsecured, this credit score is mandatory.
- Ensure ample Personal Net Worth (PNW)
A borrower will have higher chances of getting a loan for hotel business in India approved if he/she has ample Personal Net Worth.
Showing that one has the PNW to repay the loan without defaulting will have a positive impact on the finance authorisation process. Some financial institutions require borrowers to have a PNW that equals the loan amount. On the other hand, some lenders may need customers to have a PNW that exceeds more than a loan.
Following these tips will help individuals secure a loan for hotel business in India. If they are an existing customer of a lender, then they even have higher chances of getting it approved. Furthermore, they can also get access to pre-approved offers from NBFCs like Bajaj Finserv.
They provide pre-approved offers on various financial products like personal loans, home loans, business loans, etc. These offer lower the finance availing time by making the process simplistic.
Check out your pre-approved offer here and get your hotel business running better than ever.
