Hotel Mezzanine Financing
Mezzanine Financing
Hotel mezzanine financing adds a layer of debt between the senior loan and the owner’s equity, which reduces the cash needed to close. This can often mean the difference between getting a deal done and not. We work with mezzanine lenders and bring them in when this type of financing benefits the deal.
Is mezzanine financing right for me?
Mezzanine may fit if:
- there is a gap between the senior loan and the equity you want to put in;
- the senior loan is already at the lender’s leverage cap;
- you want to preserve cash rather than fill that gap entirely with equity.
Speak with a hotel financing expert
Call 866-994-6835 or complete the form to speak with a hotel financing expert. We will talk through your deal and review your documents at no charge, with no obligation — and you do not need to have it all organized first.
Hotel Mezzanine Financing
Mezzanine financing can be a confusing topic, and many are not sure how it works and if it will work for them. At Hotelloans.com, our financing experts work with mezzanine lenders and can tell you whether it fits your deal. Mezzanine financing is worth a look to see if it’s the right fit for you.
What is Mezzanine Financing?
Mezzanine financing loans can give you flexibility when you need it most for acquiring funds for your hotel projects. They are designed to get higher leverage so you can reduce the capital injection needed. This can help in a number of ways, from resolving cash flow issues constructing a new hotel, or in acquiring new hotel properties. Mezzanine financing can help you get to a higher leverage or LTV than what a first-lien lender will provide.
A mezzanine loan carries more risk for its lender than a first mortgage because it sits behind the senior loan in the capital stack. It is secured by a pledge of the ownership interests in the entity that owns the hotel, not by a second mortgage on the property. Mezzanine loans are different from traditional commercial financing and can offer added incentives to the lender, like an equity kicker.
How a Mezzanine Loan is Structured
Mezzanine loans usually appear on larger deals, once the senior loan reaches $10–20 million or more, and are typically co-terminous with the senior debt. The lender will decide on the rate, whether it is to be a fixed rate, floating rate, or amortized.
When should you use a mezzanine loan? Typically, there are three purposes for them:
- The most common use of mezzanine financing is in conjunction with a 1st lien lender to get higher leverage. This preservation of capital can help to acquire other income-producing properties.
- Mezzanine loans can be used for new construction to get a higher loan-to-cost.
- Hotel mezzanine financing can provide added cash for expenses or to pay off debt. Any funds which are borrowed can be repaid out of the income generated by the hotel.
By using mezzanine financing as a strategic tool hotel owners can put less money into the deal allowing them to take advantage of other opportunities in the real estate marketplace.
How Mezzanine Loans Help the Hotel and Lodging Industries
At Hotelloans.com, our focus is on getting your hotel or other lodging facility financed. We realize you may need a large amount of capital to reach your goals, expand your portfolio, purchase a new property, or renovate an existing property. We know hotel funding inside and out and how vital it is that your business acquire the right financing now, not later.
Often, banks are unwilling to provide all of the required money you need for a significant project or for another acquisition that is important to you. We place loan programs like mezzanine loans that are designed to fill the gap where needed.
As a hotel owner or property developer, you understand the importance of taking advantage of opportunities in the real estate marketplace when they are available. This comes down to making timely decisions, and time cannot wait on traditional business funding to come through. We understand this and can structure financing to meet your timeline.
Mezzanine Financing is Worth Looking Into
Mezzanine financing can add debt to a transaction and reduce the capital needed to close. It sits between the senior loan and the owner’s equity, so less of the purchase price has to come from the owner.
Owners use it to support an acquisition, a PIP renovation, or a repositioning without bringing in a new equity partner. Whether it fits depends on the property’s cash flow and how much total debt the senior lender will allow alongside it.
Mezzanine loans are subordinate, non-traditional loans which may be a blend of equity and debt or just debt. To find out how one of these loans can benefit you, contact us today.
Last reviewed: October 2026