Hotel and motel loans
Financing to buy, refinance, renovate or build a flagged hotel or motel, mainly through SBA and conventional programs. We place your loan with a lending partner that understands how hotels earn.
The pre-qualification form takes about a minute.
Programs that fit hotel property
A hotel is real estate with an operating business inside it. Lenders underwrite both: the building and the hotel’s cash flow. Most of the hotel loans we place go through SBA programs, with conventional loans as the main alternative.
- SBA 7(a) loans. Running a hotel counts as an operating business, so owner-operators qualify for SBA financing. Loan-to-value (LTV), the loan as a share of the property’s value, can reach 90%. That means roughly 10% down. The rate is typically variable, set at Prime plus a margin.
- SBA 504 loans. A bank first mortgage plus a fixed-rate SBA second, often used for larger projects. SBA treats hotels as special-purpose property, so the borrower’s share is typically 15%, or 20% for a business under two years old. Read our guide to SBA 504 loan requirements for the full rules.
- Conventional commercial loans. Up to 80% LTV with full income documentation. A fit when you want to skip SBA fees or the property doesn’t meet SBA rules.
- Refinance and cash-out. Replace existing debt or pull equity out of a hotel you already own.
- Bridge, construction and hard money. Short-term or construction financing is available case by case, for example to complete a renovation before moving to permanent financing. Hard money is offered in Georgia only.
Hotels in all 50 states are eligible. The minimum loan on commercial real estate programs is $250,000. For larger deals, our debt programs place senior loans on hotels from $1 million.
Deals we can help with
- Buying an existing hotel or motel
- Refinancing, with or without cash-out
- Property improvement plan (PIP) and renovation work
- Rebrands and conversions
- Ground-up construction
What lenders look at
Cash flow from your tax returns
Lenders size a hotel loan on the cash flow it has already produced, as shown on its tax returns. They expect a debt service coverage ratio (DSCR) of 1.25x or higher. DSCR is net operating income divided by annual loan payments, so 1.25x means $1.25 of income for every $1.00 of debt payments. Our DSCR calculator helps you check a deal before you apply.
Three years of history
Expect lenders to review three years of the hotel’s operating history, along with an occupancy report showing how many rooms have been filled.
The flag and the franchise
Our lending partners finance flagged hotels, meaning properties that operate under a franchise brand. Independent hotels are hard to finance, so they generally fall outside what we place. Lenders review the franchise agreement and any property improvement plan the brand requires. They also typically ask for a comfort letter, the brand’s written confirmation that the franchise will continue if the lender ever takes over the property.
The manager
Hotels are hands-on businesses. Lenders want to know who runs the property day to day and ask for the manager’s resume.
Furniture, fixtures and equipment
The loan is secured by the property and also by the hotel’s equipment, through a UCC filing (a public lien on business assets). Plan for that collateral to stay with the loan until it is paid off.
Documents to have ready
- Three years of business tax returns for the hotel
- A profit and loss (P&L) statement for the property
- Occupancy reports
- Three years of personal tax returns for each guarantor
- A personal financial statement (PFS) for each guarantor
- The franchise agreement, any PIP and the brand’s comfort letter
- The manager’s resume
How it works
- Apply online. Complete the 1-minute pre-qualification form with your hotel and loan request.
- Talk to your loan expert. You are assigned one Standout loan expert who reviews the hotel and identifies the programs that fit.
- Compare your options. Your loan expert presents the best available options from our lending partners.
- Close. We package the file for the lending partner you choose and guide you through to closing, typically in about 45 days, or 60 to 90 days for an SBA 504.
Common questions
Can I use an SBA loan to buy a hotel?
Yes. Running a hotel counts as an operating business, so owner-operators can use SBA 7(a) or SBA 504 financing. Most of the hotel loans we place go through SBA programs.
How much do I need for a down payment?
With SBA 7(a), loan-to-value can reach 90%, so about 10% down. SBA 504 typically asks for 15% on a hotel, or 20% for a newer business. Conventional loans go up to 80% loan-to-value, so about 20% down.
Do you finance independent hotels?
Our lending partners finance flagged hotels, meaning properties that operate under a franchise brand. Independent and boutique hotels are hard to finance, so they generally fall outside what we place.
What kinds of hotels qualify?
Limited service, select service, full service, extended stay, motels and resorts can all qualify, with no minimum room count. Properties in all 50 states are eligible.
Can the loan pay for a property improvement plan (PIP)?
Yes. Acquisitions, refinances, cash-out, PIP and renovation work, rebrands and conversions, and ground-up construction can all be financed.
How long does a hotel loan take to close?
Typically about 45 days, or 60 to 90 days for an SBA 504 loan because the CDC and SBA both review it. Having three years of tax returns, occupancy reports and your franchise documents ready keeps it on track.
Explore the programs
All loan programs- Loan program SBA 7(a) loans for commercial real estate Buy, build or improve the building your business operates from, with a lower down payment. Repayment up to 25 years
- Loan program SBA 504 loans for commercial real estate Buy, build or renovate the building your business operates from, with a fixed rate and as little as 10% down. Fixed rate on the SBA portion
- Loan program Conventional commercial loans Bank and credit-union financing. For strong credit and full documentation, usually the lowest-cost path. Banks and credit unions
Ready to take the next step?
Apply in about a minute. Your loan expert will guide you from there.