How the Money Stacks Up to Close an Accommodation Deal Fast
How to Fund an Accommodation Purchase | Switchboard Finance
Accommodation Finance
Capital Stack · Vendor Carry · Going Concern
How the Money Stacks Up to Close an Accommodation Deal Fast
Buying a motel, pub or park as a going concern often means moving faster than a single bank loan allows. The way you get there is the capital stack: senior debt, a vendor carry and a short bridge, layered in the right order. Here is how the layers rank, and how that order gets you to settlement.
Quick Answer
Funding a going-concern accommodation purchase quickly usually means layering facilities, not finding one loan. A senior commercial property facility does most of the lifting; a vendor carry fills part of the gap; a short bridge covers timing. How the layers rank is what gets you to settlement.
Start with the stack, not the loan
Funding a fast accommodation purchase starts with the stack, not with hunting for one perfect loan. Most buyers ask which loan will cover the price; the more useful question is which layers you will use, and in what order they rank. That set of layers is the capital stack, and for a going concern purchase it usually combines a senior facility, your own cash equity, and one or two shorter instruments to fill what is left.
The piece people underestimate is the gap between senior advance and your equity. The senior lender funds most of the price, your deposit funds another slice, and something has to cover the difference. Mapping that gap early, the way we lay it out on the accommodation finance hub, is what keeps a quick purchase from stalling at the last minute.
How the layers rank: senior first, then the vendor carry
The layers rank in a fixed order, and that order is what makes the structure fundable. The senior facility sits first; on a freehold purchase that is usually a commercial property loan, and it has first claim on the security. Your cash equity sits underneath it.
How big that first layer is comes down to the going-concern valuation, not the asking price, and that distinction sizes every layer above it. The senior lender advances against what the freehold and the trade are worth as one working asset, then applies its loan to value ceiling to that figure, indicative and varies by lender and security. The higher that advance, the smaller the gap the equity, the vendor carry and any short caveat facility have to fill. It is also why two buyers paying the same price can need very different stacks: a sharper valuation, a cleaner trading history or a larger deposit each shrink the gap, while thin or seasonal trade widens it. Reading the valuation early, before the contract goes unconditional, is what turns the rest of the stack from guesswork into a plan.
A vendor carry, where the seller leaves part of the price in the deal, is typically around 10% to 25% of the price, indicative and varies by deal, and it sits second-ranking behind the senior facility. Because two parties now hold security over the same asset, they agree a deed of priority that registers their order, and the carry is usually noted as a security interest on the PPSR. From the underwriter's seat, the first question is whether the senior facility can carry the trade on its own; the carry only works if the senior debt is comfortable sitting above it.
Where a vendor carry fits well
- A motivated vendor who wants the sale completed
- A going concern with steady, provable trade
- A senior facility that leaves a clear, fundable gap
- A realistic refinance exit inside a few years
Where it gets tricky
- A vendor who needs every dollar at settlement
- Thin or seasonal trade the senior lender discounts
- A senior lender that will not allow second-ranking security
- No clear path to refinance the carry out
Sequencing the stack to close fast
Closing fast is less about any single approval and more about the order you line the layers up. The senior facility takes the longest, so it moves first; while it is in assessment, the vendor carry terms get documented and the deed of priority is drafted. If settlement arrives before every layer has drawn, a short caveat loan can cover the timing, then fall away once the senior loan settles. In the deals that settle on time, the stack is agreed up front, before the contract goes unconditional, rather than assembled in the final week.
One boundary worth naming: bringing in an outside equity investor, or syndicating the purchase, is a different question from the secured layers above. Equity and structuring of that kind is licensed financial-product territory and sits with a licensed adviser; our side is the secured, business-purpose lending that makes up the rest of the stack.
Clearing the stack: your exit
Every layer above the senior facility needs an exit, and for the vendor carry the exit is almost always a refinance. The carry is short by design: it is cleared by refinance, usually around 2 to 5 years, varies by deal, once the trade has been proven on your ownership. At that point a mainstream commercial property refinance can repay the carry, and the structure collapses back to a single senior loan.
Planning that exit at the start, not the end, is what makes a lender comfortable funding the stack in the first place; a clear exit is also what the second-ranking carry holder is relying on to be repaid. If you want to see how a second-ranking layer compares with simply enlarging the senior loan, our note on a second mortgage versus a commercial property loan walks through the trade-off.
Funding a going-concern accommodation purchase fast is a sequencing problem, not a single-loan problem. A senior facility does most of the lifting, a vendor carry typically fills part of the gap second-ranking behind it, and a short bridge can cover timing, with each layer ranked by a deed of priority and cleared in turn. Get the order agreed before the contract goes unconditional, and a quick settlement becomes realistic.
Key takeaway: Decide the order of your capital stack before you sign, not after, and keep a clear refinance exit for the vendor carry.Frequently Asked Questions
Closing the gap between your deposit and the loan usually means adding a layer to the stack rather than finding a bigger single loan. A vendor carry can cover part of the gap between senior advance and your equity, and a short caveat loan can cover timing if settlement arrives first. The right mix depends on the vendor, the trade, and how the senior lender views second-ranking security.
A capital stack is the set of funding layers that together pay for a purchase, ranked by who gets repaid first. For a going concern accommodation purchase, the senior facility usually sits at the top, your cash equity underneath, and a vendor carry fills part of what remains. The order the layers rank in decides how the deal is documented and secured.
A vendor carry almost always ranks second-ranking behind the senior facility, secured by a charge registered on the PPSR and set out in a deed of priority, the second-ranking security agreement. That priority order is what lets the senior lender advance the bulk of the funds with confidence. The vendor agrees to be repaid after the senior debt, usually once you refinance.
A vendor carry usually lasts only until you can refinance it out, commonly cleared by refinance, usually around 2 to 5 years, and it varies by deal and lender. It is meant to be a short bridge over the gap, not permanent funding. As the trade is proven on your watch, a mainstream commercial property refinance can take out the carry and simplify the structure.
Buying an accommodation business quickly is realistic when the stack is sequenced in advance rather than assembled at the last minute. Getting the senior commercial property facility moving early, documenting the vendor carry, and keeping a short bridge on standby is what compresses the timeline. It is worth speaking to a broker before the contract goes unconditional, so the order is set rather than scrambled.
FBAA Accredited
