Every year a steady stream of buyers, some experienced operators, many making a life change, sets out to buy a hotel or guest house in Scotland. Most of the finance advice they find is written for England, by people who have never run one. We own and run a west coast hotel, we’ve financed it, fitted it out and traded it through Highland seasons, and this guide covers what actually matters when you borrow to buy one here.
A trading hotel purchase is two assets wearing one price tag: a property, and a business with customers, staff, a licence and a reputation. Lenders see it the same way. The valuation that matters is the going-concern valuation, the property as a fully equipped operational entity, and it is driven by the trade: turnover, sustainable profit, and the mix between rooms, wet sales and food. The gap between that figure and what the empty building would fetch is effectively the value of the business, and it only exists on paper if the accounts support it.
That has a practical consequence: the accounts are the deal. Before you fall in love with a building, ask the selling agent for three years of accounts and the current year’s management figures. How they read decides everything that follows.
Plan around four numbers:
Hospitality is specialist lending. Plenty of banks will not touch it; the ones that do look well past the bricks:
First-time operators fund hotels every year, so ignore anyone who says it cannot be done. Expect a lower loan-to-value, more questions, and real weight placed on your wider track record and your plan: who runs breakfast service on day one, what happens to the chef, how the winter is staffed. Lenders are not testing your dreams; they are testing whether the trade survives the handover. A candid plan beats a glossy one.
One warning that matters more than any other: if you or your family will live in part of the property as your home, say so at the very start. Where the residential element crosses the regulated threshold, the loan may be a regulated mortgage contract, which changes who can arrange it, and we would rather tell you in the first conversation than lose you weeks into an application. The details are on our hospitality finance page.
Scotland runs its own legal system for property, and hotel deals feel it:
Much of Scotland’s hotel stock sits exactly where some lenders quietly decline to lend: the Highlands, the west coast, the islands. Others cap loan-to-value outside the central belt. None of that makes these purchases unfundable; strong lifestyle-destination businesses on the tourist routes attract genuine specialist appetite. It makes lender selection the first job, not an afterthought.
Seasonality is the other honest conversation. West coast trading is more extreme than lenders based in London assume: exceptional summers, long quiet winters, and costs (freight, utilities, staffing) that need explaining rather than hiding. Present a full trading year with honest management figures and the seasonality becomes a pattern a sector lender recognises, not a red flag. This is our home market; we trade in it ourselves.
The purchase is rarely the whole story. Kitchens, refrigeration, furniture and EPOS spread sensibly over asset finance instead of draining the working capital you just protected. Refurbishment while trading is fundable through staged facilities, and we have run a fit-out around a live service ourselves, so you will get a candid view on phasing as well as the money. And if the plan is buy now, improve, then refinance at the stronger figures, that structure should be agreed at the start, not improvised later.
Lenders lend against the trading record in the accounts, not the trading you believe is possible. Potential affects which lender and what structure, and a credible uplift plan strengthens a case, but the sustainable earnings evidence carries the decision. Where the record is thin, bridging to a refinance after a proven season is sometimes the honest structure.
Trading hotels are valued as fully equipped operational entities: the property, the fixtures, the licence and the trade together, based on fair maintainable turnover and profit. This is usually higher than the vacant possession value of the building alone, and lenders apply their loan-to-value to it, which is why the trading evidence matters so much.
Some do, assessed on the strength of the trade and the lease terms rather than bricks. Expect lower gearing and fewer lenders at the table, and factor in what the lease says about assignation, rent reviews and repairs. Goodwill-and-lease purchases under £100k sit outside our property minimum but can sometimes be funded as business lending.
It happens often; lifestyle owners wind the trade down before selling. The deal is still fundable if the price reflects the real trading position and your plan is credible, but expect more deposit, more scrutiny and possibly a staged structure. What kills applications is presenting optimistic projections as if they were history.
Usually not where the sale qualifies as a transfer of a going concern, but the conditions are precise and getting them wrong is expensive. This is one for your accountant before missives conclude, not after.
Found the hotel? Send us the particulars, the asking price and the last accounts you've seen. Within one working day we'll tell you honestly whether it funds, at roughly what cost, and what would strengthen the deal.