Financing a hotel or motel in Canada is very different from securing a standard commercial mortgage. These types of properties come with unique risks, operational demands, and seasonal revenue patterns, which affect how lenders assess loan applications. Whether you’re buying your first property, expanding your portfolio, or renovating an existing property, understanding your financing options is essential.
Key Points:
- Business loan options for hotels and motels include traditional bank business loans, commercial mortgages, government-backed programs, private lenders, and franchise in-house funding.
- Approval typically depends on credit strength, collateral, business plans, and the property’s ability to generate consistent revenue.
- Land prices, whether you’re constructing new or renovating, property size, permits, and upfront operating capital all significantly affect total investment.
How Much Does It Cost To Open Up A Hotel Or Motel?
Opening a hotel or motel in Canada requires significant upfront investment, and costs vary widely. That said, here’s a general snapshot of potential costs to open a hotel or motel:
| Small Motels (20–40 rooms): ~$1 to $3 million to buy/renovate an existing motel ~$3 to $6 million+ for new construction1 Hotel Developments: ~$250,000 per room, depending on the hotel type2. Boutique/Mid-Size Hotels: Multi-million dollar range3. |
Key Factors That Impact Total Cost
The following elements play a key role in the overall cost of buying a hotel or motel:
- Land Acquisition & Location: Prime urban locations or tourist hotspots demand higher land and property prices, which can significantly increase total project costs.
- Construction vs. Renovation: Building a new property typically costs more per square foot than renovating an existing structure. New construction also involves longer timelines and more permit hurdles.
- Size & Quality Of The Property: Larger hotels with more rooms or upscale amenities require a higher investment.
- Permits, Licenses & Professional Fees: Local regulations, zoning laws, environmental studies, business licensing, and compliance costs can add thousands to hundreds of thousands of dollars to the overall cost.
- Operating & Contingency Capital: Budgeting for several months of operating expenses is important to cover employee payroll, utilities, marketing, and other day-to-day costs before the business becomes profitable.
Financing To Help You Get Your Business Started
Here are a few financing options to help you launch or expand your hotel/motel business:
Business Loans
Best for: Entrepreneurs with strong credit and financials and a clear plan for how the business will generate revenue. Also ideal for franchises to cover the initial investment.
Traditional business loans from major Canadian banks — including RBC, TD, BMO, Scotiabank, and CIBC — are one of the most common ways to fund a new business. These lenders typically offer competitive rates and structured repayment terms, but they also have stricter approval requirements.
More specifically, banks usually look for the following:
- A strong personal and business credit history
- A detailed business plan
- Collateral
| What If You Can’t Qualify For A Bank Loan? If you don’t have the credit, financials, or collateral needed to secure a business loan from a bank, a private lender may be willing to extend the funds. Private lenders typically have more flexible approval criteria and faster turnaround times, making their loans accessible to newer entrepreneurs. |
Commercial Real Estate / Mortgage Loans
Best for: Purchasing an existing hotel or motel, refinancing, or acquiring an owner‑operated property.
A commercial mortgage is the most common financing tool for hotel and motel real estate. With a commercial mortgage, the property itself serves as collateral.
Unlike residential mortgages, which focus mainly on your personal income and the value of the property, commercial financing evaluates the property’s ability to generate revenue, the overall health of the business, long‑term investment potential, and a clean environmental report. A strong Debt Service Coverage Ratio (DSCR) is also necessary, which measures a property’s ability to pay its debt using its operating income.
A commercial mortgage may be a good option if you’re opening an independent motel or bed and breakfast. That’s because these types of loans take into account the value of the real estate itself and the revenue it can generate, which works in your favour when the property is central to your business model.
Leasehold Improvement Loans
Best for: Businesses that lease their commercial space and need capital to customize or upgrade it.
A business that rents its space often needs to reshape it so the place actually works for day‑to‑day operations. These changes, known as ‘leasehold improvements’, can range from simple cosmetic updates to major structural or equipment installations that permanently enhance the leased premises.
Learn more: Everything You Need To Know About Leasehold Improvements
Government Programs & Grants
Government‑backed financing may also be available if you’re looking to buy, build, or improve a hotel or motel in Canada. While grants for hospitality businesses are limited, one of the most widely used programs for real estate financing is the Canada Small Business Financing Program (CSBFP).
Canada Small Business Financing Program (CSBFP)
Best for: First‑time owners, smaller independent operators, or those who may have trouble getting traditional financing.
The CSBFP is a federal loan‑guarantee program designed to help small businesses access financing they may not qualify for through traditional lending alone. Instead of lending directly, the government shares the risk with approved financial institutions, making it easier for borrowers to secure funding. Plus, since these loans are issued through major banks, they often come with competitive interest rates.
Funding through the CSBFP can be used to purchase or improve hotels or motels, or to cover the cost of renovations and upgrades of guest rooms, lobbies, or common areas.
Eligible businesses can apply for loans of up to $1.15 million, which can be used to purchase a hotel4. This includes up to $1 million in a term loan, and up to $150,000 in a line of credit.
To qualify, businesses must have a gross annual revenue of $10 million or less.
Hotel/Motel In-House Franchise Financing
Best for: Entrepreneurs looking to purchase a hotel/motel franchise.
Some franchisors may provide in‑house financing options for new franchisees. In these cases, the franchisee pays ongoing royalty fees in exchange for access to financing and other support. The exact fees and terms depend on the details outlined in the franchise agreement.
One example is ECHO Suites Extended Stay by Wyndham. The company offers in-house financing to help cover the cost of franchise fees, startup costs, and inventory5.
Business Financing For Any Industry
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Already Have A Business But Need A Loan For Expenses?
If you’re already in business and currently operate an existing hotel/motel business, you may have financing needs to cover ongoing operation costs. Here are a few loan options available to provide you with the additional funds needed to keep your hotel or motel profitable:
| Business Line Of Credit | A business line of credit gives you ongoing access to funds that you can draw from as needed and only pay interest on the amount you use. It’s ideal for managing cash flow, covering short‑term expenses, or handling unexpected costs for your hotel or motel. |
| Merchant Cash Advance | A merchant cash advance provides a lump‑sum payment in exchange for a percentage of your future debit and credit card sales. It’s fast and easy to qualify for, but typically comes with higher costs than traditional financing. |
| Invoice Factoring | Invoice factoring allows you to sell your outstanding invoices to a financing company in exchange for immediate cash. This helps hotel and motel businesses improve cash flow without waiting for customers to pay their bills. |
| Equipment Financing | Equipment financing lets you purchase or lease vehicles or technology by using the equipment itself as collateral. It’s a practical option for businesses that need essential tools without tying up large amounts of capital upfront. |
Final Thoughts
Financing a hotel or motel in Canada requires careful planning and strong financial documentation. Whether you’re buying an existing hotel or motel, building a new one, or renovating an older property, choosing the right loan option can significantly impact your long‑term success.
FAQs
What’s the biggest benefit of invoice financing?
What types of loans can I use to finance a hotel or motel?
What do lenders look at when financing a hotel or motel?
Can I use a business loan to renovate a hotel or motel?
Does the property’s revenue affect loan approval?
Are private lenders an option for hotel or motel financing?
References:
1Financial Model. (2025, December 1). What Are the Startup Costs for a Motel? FinancialModel.net
2ZipDo. (2026, February 12). Canada Hotel Industry Statistics. ZipDo.co
3Startup Financial Projection. (2025, September 28). What Are Startup Costs for Hotel and Resort Development? StartupFinancialProjection.com
4Government of Canada. Canada Small Business Financing Program (CSBFP), Helping small businesses get loans. ised-isde.Canada.ca
5Entrepreneur. ECHO Suites Extended Stay by Wyndham. Entrepreneur.com
