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SBA Hotel Financing

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An SBA loan is an excellent way to build, refinance or purchase a hotel because it’s easier to qualify for than other types of loans.  In addition, loan amounts are higher (up to 90% LTV), and terms are very favorable.

Many people feel SBA loans require too much paperwork and take a long time to close. This is simply no longer true. In fact, we recently closed an SBA hotel purchase loan in only three weeks!  We make the process fast and easy, here’s how:  

  • We only work with lenders with extensive hotel lending experience.  
  • We only work with PLP (preferred) lenders.  These lenders have the authority to make the final credit decision on your loan and do not have to wait for the SBA to approve your loan request.  Turnaround time is drastically reduced, saving you weeks of waiting.
  • We package your SBA loan request for you.
  • We manage the entire process for you – from start to finish.

Types of SBA Loans

  • SBA 7A
  • SBA 504

SBA Financing for Hotels

Making the decision to go in on a new or existing hotel business can seem very daunting. In addition to having to do the jobs of many by yourself, you also need to work out how you plan to pay for the project.

Buying a new hotel or expanding an existing business can be expensive. Many people stumble at this initial phase because they think they will never secure the financing for it.

However, there is good news on the financing front. You may be able to secure an SBA loan for your hotel. The US Small Business Administration has a variety of loan programs that are used for the purpose of acquiring, building, accessing capital for, or refinancing, a hotel.

If you are wondering whether SBA hotel loans are right for you, is here to help ease your mind.

SBA 7A Loan for Motel or Hotel​

This is the most common type of SBA loan for a hotel. These loans are available for up to $5 million and carry low-interest rates over long repayment periods. In addition, some SBA lenders offer a second loan on top of the SBA 7A of up to $2.5 million, bringing the total loan amount to $7.5 million. The SBA 7A is versatile because it can be used for pretty much any type of hotel financing need, such as acquisition, real estate, construction, and working capital.

Facts about an SBA 7A loan:

  • The most common loan type
  • A maximum of $5 million
  • 0-3.5% guarantee fee based on maturity and guaranteed dollar amount
  • Interest rates are based on the prime rate plus a certain percentage. For example, the loan might be a prime+ 1.5%.
  • Repayment terms vary depending on what the loan is for:
    • Up to 10 years for equipment loans
    • Up to 7 years for capital loans
    • Up to 25 years for commercial real estate loans

SBA 504 for a Hotel

SBA 504 hotel loans have the reputation of being one of the most challenging loans to secure. However, they are worth the effort because they ultimately have higher loan amounts and carry fixed rates.

The SBA 504 consists of a loan from a bank lender combined with a loan from a Community Development Corporation (CDC), which is a non-profit organization. This unique combination creates a low-interest, long-term loan ideal for hotel financing.

However, the caveat is that the loan can only be secured for certain purposes, and these tend to be the purchase of fixed assets like equipment or commercial real estate.

Facts about an SBA 504 loan:

  • More complicated than the SBA 7A to secure
  • Maximum allowance of $5.5 million
  • Fees are around 3% of the loan value. However, this is incorporated into the loan.
  • Interest rates are typically 5-6%
  • Repayment terms are up to 20 years

What Projects Can You Secure an SBA Loan For?

The SBA loan can be used for a variety of hotel financing projects. The most common types are:

  • New Construction: If you plan to build a new hotel, then the SBA 7A can be available for up to 80-85% of the estimated cost of the purchase and build. Because this type of loan is high-risk, the borrower will need to put up personal collateral and meet high credit requirements.
  • Acquisition: Buying an existing hotel is the most common reason for requesting an SBA loan. Both the 7A and 504 can be used for this project, and funding for up to 90% of the cost can be achieved. Bear in mind that the application process for an SBA can be lengthy, so factor this into your timeline.
  • Refinancing: If you need to free up cash to renovate or purchase equipment, then you might be able to secure a 7A loan. To qualify, you must be able to prove that your existing loan terms are unreasonable.

How to Apply for SBA Hotel Loans​

It is important that you have your ducks in a row before applying for an SBA hotel loan. The application process requires a large amount of information, so it is a good idea to gather it before starting. You are going to need to provide:

  • The value of the property or project
  • A down payment of between 10-30%
  • What your max monthly repayments can be
  • A property appraisal
  • Your personal credit history
  • Any collateral you have access to
  • Detailed business plan

If you are unsure about any of these processes, then it is a good idea to find a hotel financing expert to help. can walk you through this process.

We will match you with the right type of SBA loan, and the right lender to find you the best possible terms for your project. You can be assured that you will receive a quality term sheet from our approved lenders in a relatively short amount of time, so you can move forward in securing your hotel.

If you are ready to find out more about the different types of SBA loans and how they can benefit you, then please contact us today. Our experts are looking forward to offering you a free consultation.

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