Business Loan for Holiday Let

Table of contents

• What are holiday home loans?
• What can you use a holiday home loan for?
• Types of finance for holiday lets
• How to maximise your loan eligibility
• Using finance to grow your Airbnb business
• Is a holiday let loan right for you?
• Why apply for a loan through Capalona?
• Holiday let loan FAQs

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63% of Britons plan to stay local for at least one holiday this year, and a third are planning on making it their main holiday. The statistics are clear; UK staycations are here to stay.

But purchasing the property or renovating an existing one can drain your personal savings. A holiday home loan can help cover essential costs and help you grow your holiday let business quickly. Learn more about them below.

What are holiday home loans?

A loan for a holiday home is specifically designed for properties let out to short-term visitors (i.e., tourists). Business loans for a holiday let differ from standard residential mortgages or traditional buy-to-let mortgages because they account for seasonal income that’s typical of the holiday home market.

These specific loans and commercial mortgages are essential for the holiday let market because standard mortgage agreements usually prohibit short-term letting, such as an Airbnb.

What can you use a holiday home loan for?

You can use your holiday home loan however you want, as long as it's spent in your holiday home business. Some ideas include upgrading facilities, perhaps you want to put in a hot tub or install a new kitchen. Use it to purchase the initial property, bridge funding gaps between seasons, fund marketing campaigns, or cover unexpected maintenance costs.

Check your eligibility for holiday let business funding

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Types of finance for holiday lets

You might be looking to purchase the property, or you might be ready to renovate it. Different types of finance exist to support you at different stages of your holiday let business. Check out a few options below.

1. Holiday let mortgage

If you’re purchasing a property to let it out as a holiday rental, you’ll need a holiday let mortgage. Lenders typically offer these to individuals or small businesses, and their assessment process focuses on seasonal rental projections.

2. Property development finance

Property development finance is short-term funding, perfect if you’re looking to convert something like a barn into a holiday cottage. The finance will cover the initial build costs before turning into a long-term mortgage when the property is habitable and ready to start accepting guests.

3. Renovation and refurbishment loans

If you’re hoping to refurbish a tired, old property into something that can command a luxury price tag, you can use a sole trader business loan or bridging finance. You can get hold of funds very quickly, and as they’re short-term in nature, you won’t be in debt long. After you finish the light refurbishments, like a new bathroom or cosmetic updates, you’ll repay the loan when you switch to your holiday let mortgage.

4. Hospitality business loans

With a holiday let business, you’re officially part of the hospitality sector, which means you can apply for a hospitality business loan. These loans account for seasonal fluctuations, and specific lenders understand the importance of investing in the guest experience. This understanding means you can access tailored and flexible financing solutions.

How to maximise your loan eligibility

Here’s how you can improve your chances of accessing more competitive loan rates:

• Create a comprehensive business plan. Include how you plan to manage your holiday let (yourself or an agency), who you’re targeting, your marketing strategy, and how you’ll use the funds.
• Generate rental projections. Ask local experts, like local holiday letting agents, independent local consultants, or national agencies, to project season rates. Your lender might have an approved list of agencies they trust to carry out these projections.
• Talk about your experience. If you have experience in property management, mention this; if you don’t, show you have carried out thorough market research.

Using finance to grow your Airbnb business

The barrier to entry for the holiday let market is lower than ever, thanks to sites like Airbnb. They allow small-scale landlords to earn a decent income from their second or only property (short-term rentals can generate 20-30% more revenue than long-term rentals). You can use your small business loan to invest in high-quality photography, improve energy efficiency with solar panels, install a sauna or hot tub, purchase remote-access smart locks or noise sensors, or take advantage of bulk-buy inventory discounts on items like towels or toiletries.

Is a holiday let loan right for you?

Taking on debt isn’t a decision any business owner should take lightly. Above all else, you need to be able to comfortably afford repayments before applying for a business loan.

Why apply for a loan through Capalona?

Every holiday let business is unique, so not every funding solution will suit your specific needs. Our platform allows you to compare various funding options in one place, instantly, helping you find a deal that closely aligns with your business needs.

Our panel of UK lenders is diverse, ranging from high-street banks to specialist providers who understand the hospitality and tourism industry. So if you’re looking for a loan for starting a holiday let business, compare business loans today.

Holiday let loan FAQs

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