According to data from The Business Research Company, the world hostels market valuation is expected to hit $451.99 billion before 2023. This will signify an impressive CAGR of 24.1% from its $364.32 billion valuation in 2021. Many have cited the end of the pandemic and the need for solo travelers to connect with other travelers as the cause of this surge.
Still, whatever it’s, there’s no doubt that the hostel industry is nearing its peak, and you’re perfectly in the right for wanting to fund a hostel business now. But, despite the lucrativeness of the industry, lots of work is required to successfully start a hostel, especially concerning funding. The business is capital intensive, and one major way you can source funds is through loans.
However, getting a loan for your hostel requires more thought than you probably imagined. There are many important steps to consider, and you must ensure you follow them to avoid future regrets. There are many online lending companies and loan facilities, and it’s not uncommon for one to get confused while searching for the perfect one. That’s why many business owners visit loan comparison sites like laina-finance.fi to compare different loan deals and lending institutions to make the best decision for their firms.
There are things you must consider before taking out a loan for your hostel business, and this article will focus on four of them.
Have a Budget, Know How Much You Need
It’s impossible to run a successful business without adequate planning and budgeting. You’ll have to understand what you need and how much they might cost. Before walking into any lending company or visiting any online, you must know the exact amount you want. So when you’re asked that question, your answer shouldn’t be how much they’ll be willing to give you; it should be how much you really need.
If you plan to buy an already existing building for renovations, do your research and find out the costs. The same applies to furniture, maintenance, and other important hostel expenses. Every detail should be planned out as this will make you look trustworthy and increase your chances of getting the credit facility.
For instance, lending companies like Sortter usually have a visible loan amount range, as seen here https://laina-finance.fi/sortter-laina. So, after you must have planned your budget, you can check there to see if what you are looking for is within their lending range.
Decide the Type of Loan that Fits Your Plan
After figuring out the exact amount you need, you’ll need to determine the type of loan that fits that amount and your business. This also comes down to adequate planning.
At times like this, you’ll have to answer questions like, when do I expect to start making profits? How long will it take to complete the loan repayment? The answer to these questions will determine if you’re going for a short or long-term facility.
Once you have the answers to these and the many more questions in your business plan, start searching for lenders that offer credit advances similar to what you need. Generally, most lenders list out their terms publicly. For example, you can view Ferratum loan terms here https://laina-finance.fi/ferratum-laina to see if they are a good fit.
Arrange the Required Documents
After singling out the credit institution that fits your plans, check to see the documents they require for applications and start preparing them.
Some lenders might be very stringent. They might require you to provide proof of identity and your credit statement.
Also, depending on the length of the facility, you might have to provide financial projections for the hostel. Some other documents include lease statements, hostel licenses, cash flow statements, income statements, business sheets, and hostel tax returns.
Some institutions might even require you to bring collateral. This will make the process easier but ensure you assess the value of your collateral before making any decision. Don’t ever risk what you’re not willing to lose.
Find the Best Loan and Apply
No matter how urgent you need a loan, always take time to search for the ones with the best terms. There are lots of loan comparison sites you can use to compare and make informed decisions.
Some of the things to look out for before you take a credit advance for your hostel business includes:
- Annual percentage rate (APR)
- Penalties and fees
- The loan amount and term
- The speed and ease of disbursing the loan.
Once you’ve confirmed all these, get the documents required, and apply. Remember to crosscheck before any submission because mistakes can delay or deny your application.
The Bottom Line
At a compound annual growth rate (CAGR) of 16.8%, the hostel industry is expected to hit a market valuation of $840 billion by 2026. Solo travel is on the rise, and hostels are in great demand. Sourcing a loan to fund your hostel is a reasonable business decision, but that will solely depend on your approach to taking the advance.
We’ve looked at four important steps you should consider before going ahead with your plan. They include knowing the amount you want, deciding the best terms, preparing the required documents, and applying.