100% Hotel Finance: Full Funding for Branded Hotels
100% hotel finance is a commercial mortgage, available in the UK for branded trading hotels on loans above £1m, lent at up to 100% of the hotel's vacant possession value. It is not development finance and it has nothing to do with building anything. It is a trading business mortgage for hotels operating under a recognised brand, and appetite for it sits in a very small corner of the market. We know where.
What is 100% hotel finance?
100% hotel finance is a commercial mortgage secured on a trading hotel, where the lender advances 100% of the property's vacant possession value rather than the usual 60% to 70%. The product exists for hotels trading under a recognised brand, on loans above £1m, and it is priced and structured like the owner-occupier trading business mortgage it is.
Be clear about what the 100% refers to. It is 100% of the vacant possession value, the bricks and mortar figure, not 100% of whatever a seller is asking for the business. On a well-traded hotel the going concern price usually sits above the vacant possession value, so the loan covers most of the purchase rather than every pound of it. Where the price sits at or close to the bricks value, which happens more often than people expect with branded properties changing hands inside a group or through an operator exit, the mortgage genuinely funds the whole purchase.
Most brokers do not know this product exists. It is not advertised, the lending appetite behind it does not shout about it, and you will not find it on a comparison site. Around a third of the hotel enquiries we take start with someone who has been told twice that 65% is the ceiling.
Why do branded hotels qualify for 100% funding?
Because the trading income is easier to believe. A hotel flying a recognised national or international flag comes with brand standards, a central booking engine, published RevPAR performance against a defined competitive set, and inspection regimes that keep the physical product to a known floor. An underwriter looking at three years of accounts from a branded hotel is looking at income produced by a system, not a personality.
An unbranded hotel of identical size and turnover will not achieve 100%. The best independent operators with excellent accounts can push to around 90% of vacant possession value, and most sit well below that. The delta between those two numbers is what the brand is worth to a lender, whatever it costs the operator in fees.
The blunt version: the flag de-risks the income, and the income is what repays the loan. Lenders are not lending against the sign on the roof. They are lending against what the sign does to midweek occupancy.
How is a trading hotel valued, and why does it matter?
A trading hotel carries two values. The market value as a fully equipped operational entity, the going concern figure, reflects what the business is worth trading, and is typically assessed off a multiple of EBITDA. The vacant possession value is what the building would fetch empty. On a healthy hotel the going concern figure runs comfortably above vacant possession.
100% hotel finance is written against the vacant possession figure, and in practice the facility also has to sit within a sensible fraction of the going concern value, roughly two thirds. That double test is what makes the product possible at all. Full gearing against the bricks still leaves the lender a margin against the trading value, so the structure is less aggressive than the headline suggests. It works.
This is also why the valuation instruction matters more on these cases than almost anything else. We have seen a deal die because the valuer was handed thin management information and defaulted to cautious assumptions on both figures. Get the accounts pack right before the valuer is instructed, not after.
What rates does 100% hotel finance carry?
At full gearing, expect fixed rates in the low to mid 8s, or variable pricing around four percentage points over base. The Bank of England base rate stands at 3.75% as of late July 2026, which puts variable pricing at full gearing a little above 8%. Gearing is the main pricing lever: each step down the loan-to-value bands takes roughly a quarter to half a point off the rate, and a case at conventional 60% gearing prices more than a full point cheaper.
Discounts are available and they stack in a way that rewards preparation. Evidence of strong energy performance on the building commonly earns a quarter point. Larger loans earn another. Demonstrating debt service cover of 200% or better at application can earn a further quarter point. A well-prepared branded case at 100% of vacant possession value can land under 8% fixed. A badly prepared version of the same case will not.
Do not anchor on the rate alone. The correct comparison is against the cash the structure releases. An operator putting £400,000 into a purchase instead of £1.5m has £1.1m still working in the business, and hotels are capital-hungry things.
What does the debt service cover test look like?
Debt service cover is the engine of the whole product. Lenders want the hotel's adjusted EBITDA to cover the annual mortgage payments with room to spare: 130% cover is the practical floor, and 200% or better unlocks the strongest terms. Cover is assessed on the trailing accounts and current-year management figures, not the projections in the sale brochure.
If the accounts cannot show the cover, the answer is no. No amount of brand polish changes it, and we tell operators that on the first call rather than three weeks into an application.
How is the loan structured?
Three features define the structure at the top of the gearing range. First, loans above 80% of vacant possession value fully amortise from day one. There is no interest-only option at full gearing; the debt comes down from the first month, which is precisely why the debt service test is applied so firmly. Second, personal guarantees are expected on lending above 70% of vacant possession value. Third, larger facilities are relationship-managed with quarterly management accounts, so the reporting obligation continues for the life of the loan, not just the application.
Terms typically run 15 to 25 years. The amortisation profile interacts with the cover test, so a longer term can be the difference between a pass and a fail on an otherwise identical case. This is exactly the sort of structuring a broker should be doing before the application goes anywhere near a lender.
Who qualifies for 100% hotel finance?
Experienced operators. That means a trading track record in hospitality, clean conduct on existing facilities, and accounts that hold up. The classic profiles we arrange this for: an operator group adding another branded site, a management team buying the hotel they already run, and owner-operators refinancing to release capital that is trapped in bricks. First-time hotel buyers with no hospitality background are not the market for this product, and pretending otherwise wastes everyone's time.
One instruction, given across the desk: assemble three full years of accounts, the current year management figures, and the brand performance reports before anyone instructs a valuation. The debt service evidence drives the rate discounts, the valuer's assumptions, and the credit decision. It is the single highest-value hour of preparation on these deals.
Worked example: £1.85m at 100% of vacant possession value
A 62-bedroom branded hotel in a South West coastal town, going concern price £2.6m, vacant possession value £1.85m. The buyer, an operator with two existing sites, borrowed £1.85m, 100% of the vacant possession value and 71% of the price, funding the balance from the group. Trailing EBITDA of £520,000 against annual debt service a little over £190,000 on an 18-year amortising fix put cover around 270%, which earned the full stack of discounts and a fixed rate below 8%. The alternative at 65% gearing needed £900,000 more cash. That cash refurbished twelve bedrooms instead.
Worked example: £12.5m for a single-asset purchase
A 124-bedroom branded hotel on a Midlands motorway corridor, going concern value £14.2m, vacant possession value £12.5m. The facility: £12.5m at 100% of vacant possession value, 20-year amortisation, EBITDA of £2.6m against annual debt service around £1.26m, cover just over 200%. Personal guarantees from the principals, quarterly management accounts, and completion inside ten weeks. The full case study is linked below.
What if the hotel is unbranded?
Gearing steps down. The strongest independent cases reach around 90% of vacant possession value, and the wider unbranded market sits at 60% to 75%. If you are buying an independent hotel and intend to take a franchise, sequencing matters: a signed brand agreement before completion can move the case into the branded tier, and we have structured purchases around exactly that timing. Talk to us before you sign anything, because the order of signatures changes the gearing.
What are the risks of borrowing at 100%?
Full gearing means full obligations. The loan amortises from day one, so the monthly commitment is materially higher than an interest-only facility at lower gearing, and a soft trading year eats the headroom fast. Personal guarantees put the principals' own position behind the debt. And a hotel is an operating business: RevPAR moves with the economy, refurbishment cycles are not optional under a brand, and the cover that looked comfortable at application must survive the lean years, not just the good ones. If the margin between EBITDA and debt service is thin on day one, borrow less. We say that to clients more often than they expect a broker to.
How do you apply for 100% hotel finance?
The process runs like any owner-occupier commercial mortgage, with heavier emphasis on the trading pack. Expect eight to twelve weeks from first call to completion on a clean case.
Frequently asked questions
Is 100% hotel finance really 100%?
It is 100% of the hotel's vacant possession value, not 100% of the asking price. Where the price sits close to the bricks value the loan funds the entire purchase. On a strongly traded hotel priced above vacant possession, the buyer funds the difference.
What is the minimum loan?
£1m. This is a large-loan product for trading hotels, and the strongest structures apply on the larger facilities. Below £1m, conventional owner-occupier gearing of 60% to 80% applies.
Which hotels count as branded?
Hotels trading under a recognised national or international brand, whether franchised or operated under a brand agreement. The test is the flag and the systems behind it, not the ownership model underneath.
Can an unbranded hotel get 100% finance?
No. The best unbranded cases reach around 90% of vacant possession value, and most sit lower. Taking a brand agreement before completion can move a purchase into the branded tier.
What are the rates?
At full gearing, fixed rates in the low to mid 8s or variable around four points over base. Discounts for energy performance, loan size and strong debt service cover can bring a well-prepared case under 8% fixed.
Is interest-only available?
Not at full gearing. Lending above 80% of vacant possession value fully amortises from day one. Interest-only and part-amortising structures exist at conventional gearing levels.
Are personal guarantees required?
Expect personal guarantees on lending above 70% of vacant possession value. At 100% they are a standing feature of the structure, alongside a debenture over the operating company.
How long does it take?
Eight to twelve weeks from first call to completion on a clean case. The trading pack is the usual source of delay, which is why we build it before the valuation is instructed.
Can a management team use this to buy the hotel they run?
Yes. A management buyout of a branded hotel is one of the natural fits for the product, because the operating track record and the accounts already belong to the people borrowing.
Does FD Commercial charge a broker fee?
No. We do not charge broker fees on commercial mortgages. We are paid by the lender on completion.
Related resources
Illustrative figures. Rates, gearing levels and cost figures reflect market conditions in late July 2026 and depend on the hotel, the brand, the accounts and the wider case. Your property may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.
100% hotel finance exists for branded hotels on loans above £1m, and the appetite sits in a corner of the market most brokers never find. If you are buying, refinancing or buying out the hotel you run, start with the accounts and a conversation.
Call 03300 100315