Hospitality Finance – The insider’s secrets to a better finance deal

by knowing what the Banks want.

 Ever felt like the Bank talks a different language when it comes to getting finance?

You’re not alone.

This is because you don’t yet understand what the Bank looks for when considering finance.

Jonathan looks at the challenges faced by those looking for Hospitality finance using his expertise gained inside the banking circle.

In this post you will learn some of the general conditionals and covenants that form part of most finance offers from Banks. We also explore some key financial metrics used by Banks.

 Ready to know what they want?

 Hospitality Finance - The insider's secrets to a better finance deal #hospitalityfinance Click To Tweet


 What’s your focus?

As business owners, your focus is on running your business from day to day, through to forecasting. Finance forms part of your day to day operating and longer term goals. When looking at finance most business owners tend to focus on the following:

  • It makes sense to me – The numbers are good. Has the loan has been approved
  • What interest rate will I be charged


What’s the Banks focus?

While business owners focus on interest rates and their trading numbers, the Banks focus is different. Hospitality finance is unique so it is treated differently to finance in other industries. Each of the Banks will focus on similar requirements when financing, however, some of the key fundamentals are as follows:

  • Who are the owners and what Management experience do they have; 
    • Is there previous experience managing a similar venue or venues
    • How long have they been in the industry
  • What does the valuation show and how much useful information is contained in the valuation;
    • A valuation contains valuable information on trading analysis, competitor analysis and other relevant industry analysis
  • Where is the asset located? Is it in a Metro or Regional location;
    • Banks have different views on looking at venues located in Metro versus Regional areas. This can have impacts on the Loan to Valuation Ratio that the Bank will be comfortable lending at
  • What is the departmental split of Revenue;
    • The Bank will look at how the venues revenue is split. So how much revenue is made from food, beverages and gaming. The Banks like a good mix of revenue to limit effects on trade through legislative and economic changes 
  • What is the Loan to Valuation Ratio (LVR) that is being requested;
    • LVR is looked at by the Banks and this changes with Bank policy changes. When considering any hospitality purchase, it is important to understand the current market conditions around LVR
  • What are the financial metrics of the transaction (e.g. what is the Interest Coverage and Leverage Ratio) – can the loan be repaid;
    • The Banks will be looking at minimum industry benchmarks with a view to meeting loan commitments
  • Does the asset need Capex spent immediately? What is your Capex Strategy?
    • Hospitality venues continually require ongoing Capex to maintain venues as well as keep up competitive advantages in the market. The Banks will look for a Capex strategy to understand how the capex requirements will be met going forward

 Pub Finance

What happens next?

Once the Bank has reviewed all of the information, as outlined in the key fundamentals above, they will decide whether to approve the loan, and on what terms.

These terms will be outlined as conditions and/or covenants in a finance offer from the Bank. These conditions and/or covenants will vary from one loan to the next, so it is extremely important to read your finance offer and understand all conditions and covenants. Understanding these are vital, as they may include reporting requirements. 

Having someone like myself negotiate on your behalf, for a finance request, means that all these can be negotiated understanding your operations. Also having someone with the ability to explain these conditions and/or covenants in your language. No more Bank jargon!

#HospitalityFinance #PubFinance #HotelFinance Click To Tweet

Did you know, the Banks constantly review how much they will lend in different industries. Finance in the Hospitality Industry has been under the spotlight for Banks for the last couple of years due to tightening yield rates from increase competition. This has resulted in some Banks reducing the amount they will lend.

Therefore it pays to be across everything and know exactly what the Banks will or won’t do as not all Banks will fund on similar amounts and conditions.

Hotel Finance






#commercialfinance #finance #hospitalityindustry Click To Tweet
Do you think you have got the best finance deal?

Our experience tells us, that even if you think you have, you may not. As previous clients of JEM Finance Group have discovered, after Jonathan took control of the negotiations for their finance needs. You have nothing to lose, call Jonathan at JEM Finance Group 1300 574 774.

Liked this article please share:

Jonathan StreaterJonathan StreaterDirector JEM Finance Group | Finance Broker Sydney

Over 20 years experience in the finance industry specialising in Credit Risk and Relationship Management. Employed by one of Australia’s top four banks as State Manager in the Corporate Credit Risk field. I have extensive knowledge across all industry sectors, while specialising in hospitality finance