The Irish Hotel Federation has claimed 150 hotels are under threat after the announcement that Bank of Scotland Ireland is to close.
The bank provides 20% of all loans to the hotel sector in the Irish Republic.
Irish Hotel Federation President Paul Gallagher wants an Irish government "guarantee" scheme for the sector.
He said hotels would be unable to find credit elsewhere and that many would face cash flow problems during the winter months.
"Unilateral withdrawal of these working capital facilities at the end of December would be catastrophic, particularly at a time when other banks are reluctant to take on new customers and when asset securities would continue to be held by Bank of Scotland Ireland," he told Irish broadcaster RTE.
''In addition to long-term loans, the existing package of facilities provided by Bank of Scotland Ireland to our members includes vital seasonal funding to carry them through the quieter winter period."
Some hotel owners in Ireland say they are already suffering because they are being undercut by hotels which have been seized by the banks from defaulting owners.
Bank of Scotland Ireland (BoSI), which has an office in Belfast, will transfer its business to its parent company.
Bank of Scotland will then appoint another firm to manage the wind down of the Irish loan book, a process which could take between two and 10 years.
Most of the 800 staff will transfer to this firm, however, there will be 35 compulsory redundancies in areas like wealth management.
The Unite trade union said the remaining staff are "having to come to terms with the fact that job security is now seriously compromised by what is in effect a long term winding down of the Irish operation".
RTE reported that the senior management team at BoSI have tendered to run the wind-down company.
It added that the team, which would be led by current BoSI chief executive, Joe Higgins, is thought to be the preferred bidder for the contract.
The bank has 150,000 customers across the island of Ireland and a loan book of 32bn euros.
It was heavily involved in property lending and has consequently suffered in the Irish property crash.
Customers who have loans with the bank will see those facilities run to the end of their agreed term, though they will then have to refinance with a new borrower.
Customers with deposits will have to close their accounts by the end of this year.
BoSI is ultimately owned by Lloyds who said that its other business operations, including its Halifax branch network in Northern Ireland, will not be affected by the shutdown.
Its Halifax operation in the Republic of Ireland has already been closed.