Did you know that business travelers account for nearly 75% of airlines’ profits? With so many people traveling for business or pleasure, there’s a demand for quality lodging. If you’re hoping to open a hotel, the demand is there — but you’ll need the right financing to make it happen.
Here are several financing options to consider for an extended-stay property.
Look into SBA Hotel Loans
If you’re trying to purchase or renovate an extended-stay property, SBA loans are one of the more commonly used routes. SBA 504 hotel loans can help you acquire a building or land and build a hotel property. You can even use the loans to finance machinery.
SBA loans require that you qualify as a small business and work toward making a profit. The flexible and manageable terms can reach 25 years, making repayment less of a burden.
Consider a Hotel Bridge Loan
As you investigate hotel financing, you might find relief with a bridge loan. These tend to be short-term loans that can help during the property acquisition process or construction. If another form of financing hasn’t been secured, a bridge loan can offer the needed cash flow.
Think of a bridge loan as a form of interim cash to tackle capital improvements. While bridge debt is typically priced above permanent financing, it can usually be put in place on a shorter timeline. This can help you snatch up a popular property, make necessary upgrades, and seek out less expensive financing.
Check Conventional Loans
Look into conventional loans as another way to gain funding for an extended-stay property. Conventional debt is typically priced below shorter-term, transitional financing, and you work with the bank to settle the terms.
National and local banks are ideal lenders, and if you’re planning to invest in a property near a bank, that could incentivize them to work with you on the loan.
Try Private Capital
You also could pursue a private capital loan from an individual or group. You’ll need to work with the financer to understand the terms of the loans.
If you’re investing in an in-demand property like an extended-stay hotel, it may be easier to find willing investors. More families want the perks of added space and a kitchenette when they hit the road. An extended-stay property offers just that, making it an attractive investment.
Explore Commercial Real Estate Loans
As another option, investigate commercial real estate loans. When you’re looking for hotel construction loans, these loans offer flexible loan terms. They also offer variable interest rates.
Lenders will investigate your credit score and the value of the potential property during the application process. It’s also to your benefit if you have a track record of business success.
Finance a New Extended-Stay Property
Acquiring a new extended-stay property can be an exciting venture, but you’ll need to get your finances in order. SBA loans are an accessible route to hotel financing. Bridge loans, private capital, and commercial real estate loans also are viable options to consider.
Learn more about SBA hotel loans for your extended-stay property purchase or refinance.
When you’re ready to get a hotel loan, contact us so we can help.
Frequently asked questions
What types of loans are available for financing an extended-stay hotel property?
The article identifies five options: SBA loans, bridge loans, conventional loans, private capital loans, and commercial real estate loans.
What can SBA 504 hotel loans be used for?
SBA 504 hotel loans can help you acquire a building or land, build a hotel property, and even finance machinery, with repayment terms that can reach 25 years.
What is a hotel bridge loan and when should you use one?
A bridge loan is a short-term interim financing option useful during property acquisition or construction when permanent financing hasn't yet been secured; it can be put in place on a shorter timeline than permanent financing, though it is typically priced higher.
How do conventional loans compare to bridge loans for hotel financing?
Conventional debt is typically priced below shorter-term, transitional financing like bridge loans, and terms are settled directly with the bank.
What do lenders evaluate when applying for a commercial real estate loan for a hotel?
Lenders will investigate your credit score and the value of the potential property, and having a track record of business success is also beneficial.
Why is an extended-stay hotel considered an attractive investment for private capital?
More families want the perks of added space and a kitchenette when traveling, making extended-stay properties in-demand and therefore more likely to attract willing private investors.
What are the eligibility requirements for an SBA hotel loan?
You must qualify as a small business and work toward making a profit to be eligible for an SBA hotel loan.
