Today’s hotel market is constantly changing, as new opportunities present themselves across the country. With population growth and travel needs increasing in all regions, there are many options for current and prospective hotel owners to enter the industry or leverage current experience. This includes hotels in traditionally rural areas that must respond to population growth, or those in established urban locations near airports, business centers, or sports complexes. Whether you are looking to acquire your first hotel or add to an existing portfolio, the market is well-positioned with opportunities for a variety of hoteliers.
As new and experienced hotel owners look to their next acquisition project, it is important to be armed with the right financing solution. This lending choice must accommodate the complex process of acquiring a hotel and the various steps hotel owners must take to successfully identify, analyze and complete a transaction. The Small Business Administration (SBA) provides a number of loan options well-suited for hotel acquisitions—with the 7(a) loan program consistently the most popular. With any new hotel project, after the acquisition is complete, owners often need time to market the property to their target audience and work through transitional issues. The 7(a) loan program delivers support by offering longer term options with lower monthly payments to ensure cash flow remains strong as the new location becomes established. A full list of 7(a) loan benefits are:
- Above average LTV ratios and low down payment options
- Loan terms up to 25 years—improving cash flow and freeing up capital
- Fully amortizing—no balloon payments
- Ability to pre-pay up to 25% per year without penalty, and no pre-payment penalty after three years
- Loan amounts available up to $5,000,000
- Maximum interest rate of 2.75% + the WSJ Prime Rate Index
- Consolidate Property Improvement Plans (PIP) into the overall loan
When selecting a lender to support your acquisition financing needs, it’s important to find a provider that understands both the hotel industry and relevant SBA loan requirements. This lender should be an experienced professional and be available to answer questions concerning franchise agreements, real estate valuation, and explain how funding can be used. A conversation with a knowledgeable SBA Preferred Lender that has industry expertise will be helpful in deciding if using SBA financing to fund a hotel acquisition is right for you. At Northeast Bank, our SBA lending division has strong experience deploying funds for hotel acquisitions nationwide via the SBA 7(a) loan program. We have numerous acquisition loan examples with or without a property improvement plan included in the transaction, and understand the SBA program requirements necessary to ensure the loan is properly structured.
Want to learn more? Visit https://www.northeastbank.com/hotels to read about our 30-plus years of experience in financing hotel projects like yours.