Why a Bank Knocks Back a Big Accommodation Deal
Why Banks Decline Accommodation Loans | Switchboard Finance
Accommodation Finance
Bank Declines · Going Concern · Specialist Lending
Why a Bank Knocks Back a Big Accommodation Deal
A bank saying no to a large motel, pub or park deal rarely means the deal is bad. It usually means the file sits past the bank's credit-appetite ceiling, leans on specialised single-use security, or rests on a conservative going-concern valuation. The specialist tier reads the same deal differently.
Quick Answer
A bank usually declines a large accommodation deal for structural reasons, not personal ones: the loan sits past its credit-appetite ceiling, the security is specialised, or the going concern valuation comes back conservative. A specialist or private lender reads the same deal differently.
Why a bank knocks back a big accommodation deal
A bank knocks back a big accommodation deal when the file crosses one of four structural lines, and almost none of them are a judgement on you as an operator. The biggest is the bank's credit-appetite ceiling: every lender sets an internal limit on how much it will hold against a single going-concern accommodation asset, and a larger motel, pub or park can simply sit above that line. The size of the exposure, not the quality of your trading, is what lenders actually look at first on a deal this size.
The second line is the security. Accommodation is specialised single-use security, a building that mostly works as the business it already is, so a major bank discounts it against a more generic commercial property. The third is the valuation. A conservative going concern valuation can come back below the contract price, which widens the deposit gap the bank expects you to cover.
The fourth line applies to leasehold. A leasehold deal is capped by the remaining lease term, because a lender will not hold security that outlasts the lease, so it gears lower and stops short of the figure a freehold would reach. Working out which of these four lines the deal crossed is the whole game, because each one points to a different lender tier.
The four triggers, and which tier picks each up
Each trigger that stops a bank maps cleanly to a tier that can still fund the deal. The four below set out what the major bank reads, and which tier picks each one up.
Deal size past the credit-appetite ceiling
The exposure sits above what a major bank will write on a single accommodation file, so the deal stalls on size before anyone reads the trade.
Specialist tier considers larger single exposuresSpecialised single-use security
A bank discounts a building that mostly works as the business it already is, so it reads the security as harder to resell than a generic commercial property.
Specialist lends against the security and the businessA conservative going-concern valuation
The valuation comes back below the contract price, so the deposit gap the bank expects you to cover widens beyond what the buyer planned for.
Specialist works to a realistic going-concern figureLeasehold capped by the lease term
A lender will not hold security that outlasts the lease, so a leasehold gears lower and stops short of the figure a freehold would reach.
Specialist structures around the remaining leaseRead down the specialist column and the logic is consistent: the file is assessed on security, equity and exit, not income servicing. On a freehold going concern, indicative gearing of around 60 to 70 percent of the going-concern valuation is common, varies by lender, while a leasehold gears lower, around 40 to 50 percent, capped by the remaining lease term, indicative and varies by lender. The gap between those figures and the contract price is usually closed with equity or a second mortgage, and a private lending facility is often where that gap sits.
Where a bank still fits, and where it gets tricky
A bank still fits plenty of accommodation deals; the trouble starts only when the file leans on the four triggers at once. The split below shows where a mainstream lender stays comfortable and where the deal moves to the specialist tier.
Where a bank still fits
- A freehold motel or park with clean, consistent financials
- A deal comfortably inside the credit-appetite ceiling
- Standard security a valuer reads easily
- Two to three years of steady going-concern trading
Where it gets tricky
- A larger exposure past the credit-appetite ceiling
- Specialised single-use security a bank discounts
- A conservative valuation that undershoots the contract
- A leasehold near the end of its term
When a deal lands on the right-hand side, speed usually matters too, because a specialist or private facility is often arranged to hold a settlement while a longer-term structure is put in place. That is where a caveat loan or a private facility with a clear exit strategy earns its place.
What the specialist tier actually assesses
The specialist tier is assessed on security, equity and exit, not income servicing, which is the single biggest difference from a bank. Where a bank leads with the profit and loss, what lenders actually look at first in the specialist tier is the quality of the security and the credibility of the exit, and then how much real equity you are putting in.
That changes what you bring to the table. A clean going-concern valuation, the lease or title, and a documented plan to refinance or sell carry more weight than another month of trading figures. You can see the same logic in how brokers place a property-secured private lending file, and in how a freehold and a business get funded together in a single freehold and carry structure.
It is worth remembering that commercial accommodation lending sits outside the consumer credit protections that cover a home loan, so the documentation and the structure carry real weight; the regulator's guidance on disputes about commercial loans is a useful reminder that these are negotiated, documented deals. A broker who can place the file across the accommodation finance market, the specialist tier and the private funder tier can match it to the lender that reads the deal the way it needs to be read.
A bank decline on a big accommodation deal is a sorting signal, not a verdict. The four triggers, the credit-appetite ceiling, specialised security, a conservative going-concern valuation, and a leasehold's lease-term cap, each point to a tier that reads the file on security, equity and exit rather than income servicing.
Key takeaway: map the reason for the decline to the right lender tier before you re-submit, not after.Frequently Asked Questions
A bank declines a large accommodation loan most often because the deal sits past its credit-appetite ceiling, leans on specialised single-use security, or returns a conservative going concern valuation. None of those are a judgement on you as an operator, and a specialist or private lender can often pick the same deal up.
A bank knock-back does not mean the deal is dead; it usually means the deal belongs in a different lender tier. The specialist tier is assessed on security, equity and exit, not income servicing, so a file that fails a bank's servicing test can still fund. A property-secured private lending file is a common path.
How much you can borrow against an accommodation business depends on tenure and the going concern valuation. On a freehold going concern, indicative gearing of around 60 to 70 percent is common and varies by lender, while a leasehold gears lower, around 40 to 50 percent, capped by the remaining lease term and varies by lender.
The difference between a bank and a specialist or private lender is what each one weighs first. A bank leads with income servicing and a conservative valuation, while the specialist tier and the private funder tier lead with the security, the equity in the deal and a documented exit strategy. That is why a declined deal can still be fundable.
After a bank says no to an accommodation deal, have the going-concern figures, the lease or title, and a clear security and exit picture ready, because the specialist tier reads those first. A broker with access across the accommodation finance market can match the file to the tier that fits rather than re-submitting to another bank.
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