How a Houston hostel owner secured a loan to open a 2nd location, part of her plan to attract travelers of the future once the pandemic is over

• Hostel owner Deidre Mathis saw a record number of cancellations during the pandemic.
• But 2020 turned out to be a year of growth for her and she’s opening a second location. 
• She broke down the 5 steps she took to get a loan for her new hotel, which she plans to open in 2022. 
• See more stories on Insider’s business page.

At the height of the pandemic, hostel owner Deidre Mathis saw a record number of cancellations and planned for three months without business. While it was a grim year for the travel industry, 2020 turned out to be one of growth for her.

Mathis is the founder of Wanderstay Hotels, which she launched in 2017 with one hostel in Houston, Texas. The travel and hospitality industry was one of the hardest hit during the pandemic, but Wanderstay’s occupancy rate hovered between 45% and 50% — compared to 71% in 2019 — which was well above her predictions. These bookings came mostly from out-of-state road trippers and local Houstonian and Texans in need of staycations. Some guests were volunteers, solo-travelers, and students working remotely. 

Mathis is certain of a travel renaissance once a majority of the population is vaccinated and she’s determined to capitalize on that resurgence. She’s preparing to open a second location by early 2022 — an old warehouse in East Downtown that she plans to renovate into a boutique hotel — with the help of a newly-secured loan.

“I knew that if I was going to be prepared to capture those travelers in 2022 and 2023, I needed to look to the future and start working on the second location,” she told Insider.

Securing a loan in seven months during a stable economy is hard enough, but securing one during a global crisis is an entirely different feat. Mathis declined to share the exact amount of the loan but gave her tips for business owners who are trying to get a loan to open another location. 

Hire an accountant you trust to crunch the numbers

Mathis recommends business owners start by hiring a CPA they can trust to track all business finances. She said the first thing a lender is going to ask is how your current location is doing, so it’s important to get your income statements, profits, and losses, updated and accurate.

Nurture lender relationships for future financial opportunities

When Mathis started the process of getting her loan, the first lender she went to wasn’t a good fit. And that’s okay, she said. It can take time to form the right relationship for your business. The next lender ended up financing her loan, closing it four months after their first meeting.  

Developing your relationship with a lender will build up their trust in you. Mathis recommends reaching out to lenders who already know you and have been following your business. “The bank has to trust that you’re going to pay your loan back,” she said. “They have to trust that you’re a good business owner.”

Prepare for a down payment of 10-15% to show the bank your commitment 

Next, Mathis recommends having an equity injection, essentially a down payment on your loan, of at least 10% to 15% of what you plan to borrow. This shows the bank that you’ve invested into opening a business and that you’re committed to paying back the debt. Equity injections are usually required for any financing through the Small Business Administration (SBA), such as a 7(a) loan.

“An equity injection is pretty much skin in the game,” she said. “You’ve got to have it. There’s no way around that.”

A new location requires a new business plan

When you’re planning to open a new location, it might make sense to reuse your business plan from the first location. However, Mathis advises not to make that mistake. Her bank “needed to know that I did the research,” she said, “and that I wasn’t just expecting the same thing for the first location for the second.”  

You can revise your old business plan or create an entirely new one to fit the specifications of a different location. Even if your product or service remains the same, ask yourself how this location will change operations. Will it be bigger? Cost more? Require more employees? These are all questions your lender may have, so be sure to cover all your bases. 

Mathis’ strategy for the hotel is a bit different from her hostel, catered to a slightly older age group of 21 to 38. She’s continuing her affordable model with rates under $100 per night, but all rooms will be private.

Use numbers to give a full narrative

When pitching your business for investment or debt financing, Mathis champions using numbers to state your case. Especially during a pandemic, lenders will want to know how you’re doing compared to pre-pandemic levels, as well as outlook once the economy recovers. 

“The bank at the end of the day cares about ‘how are we going to get our money back?'” she said. 

Mathis gave occupancy rates before and during the pandemic, along with projections for after the crisis. Then she gave projected revenue for the new location and explained her marketing plan and partnerships for generating those returns. She also provided an outlook for the travel industry more broadly and how she plans to capture the market. 

“This is a hard time for hospitality right now, but if you look at research, travel is one of the most resilient industries ever,” she said. “It always bounces back.”

Above all, Mathis encourages business owners to plan for the future instead of getting stuck in the present. “You’re going to wake up and COVID is going to be old news,” she said. “Part of being an entrepreneur is being a visionary and not looking at where you are now, but looking into the future.”

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