SBA 504 Loans for Hotels
Can you take out a 504 loan for a hotel? Yes, you can! With $194 billion in revenue in 2018, the industry has grown by 4.4% since 2013. These loans are focused on growth and development, so if your hotel is expanding, or you’re adding additional equipment, renovating rooms, or otherwise building a
Better Financing Starts with More Options$1.2M offered by a Bank at 6.0%$2M offered by an Agency at 5.6%$1M offered by a Credit Union at 5.1%Click Here to Get QuotesHotels and the SBA 504 Loan Program
Can you take out a 504 loan for a hotel? Yes, you can! With $194 billion in revenue in 2018, the industry has grown by 4.4% since 2013. These loans are focused on growth and development, so if your hotel is expanding, or you’re adding additional equipment, renovating rooms, or otherwise building a better business, you can consider this source of funding.
With a 504 loan, hoteliers will be able to borrow up to $5 million for the purchase of real estate, buildings, construction of buildings, the purchase of additional equipment needed (washing machines, food prep machines for an attached restaurant, etc.). In addition to traditional hotels, borrowers can also take out loans for a variety of other hospitality property types, such as motels, resorts, and bed and breakfasts.
Borrowers Are Eligible for Additional Funds Under the SBA 504 Green Program
Note that you can borrow more than $5 million if you choose to take advantage of the SBA’s go green program. In this situation, you can borrow up to $16.5 million over the life of the hotel. However, you are limited to a cap of $5 million per qualifying project. However, in order to qualify for the an SBA 504 green loan, you will need to reduce your building’s energy use by 10%, switch to a new building that uses 10% less energy, or replace 10% of your building’s energy use with energy from an alternative source, like wind, solar, or geothermal.
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Related Questions
What are the eligibility requirements for SBA 504 loans for hotels?
In order to qualify for an SBA 504 loan for a hotel, you must be a for-profit business, have a tangible net worth of less than $15 million, and have an average net income of less than $5 million after taxes for the past two years. Additionally, the loan must be used for the purchase of real estate, buildings, construction of buildings, or the purchase of additional equipment needed for the hotel. In order to qualify for the SBA 504 green loan, you will need to reduce your building’s energy use by 10%, switch to a new building that uses 10% less energy, or replace 10% of your building’s energy use with energy from an alternative source, like wind, solar, or geothermal.
Source 1 Source 2What are the benefits of SBA 504 loans for hotels?
The SBA 504 loan program offers a variety of benefits for hotels, including up to $5 million for the purchase of real estate, buildings, construction of buildings, and the purchase of additional equipment needed. In addition, borrowers can take advantage of the SBA’s go green program, which allows them to borrow up to $16.5 million over the life of the hotel, with a cap of $5 million per qualifying project. To qualify for the an SBA 504 green loan, borrowers must reduce their building’s energy use by 10%, switch to a new building that uses 10% less energy, or replace 10% of their building’s energy use with energy from an alternative source, like wind, solar, or geothermal.
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What are the maximum loan amounts for SBA 504 loans for hotels?
The maximum loan amount for SBA 504 loans for hotels is $5 million. Note that you can borrow more than $5 million if you choose to take advantage of the SBA’s go green program. In this situation, you can borrow up to $16.5 million over the life of the hotel. However, you are limited to a cap of $5 million per qualifying project. Source
What are the interest rates for SBA 504 loans for hotels?
The interest rates for SBA 504 loans for hotels can vary depending on the lender. Generally speaking, the CDC lender can charge anywhere from 2.5% to 3% APR on the loan. However, the bank may offer more variable rates or related fees, which may range anywhere from 4% to 10%.
It’s important to note that, while the rates from a traditional bank may be higher than expected, these commercial real estate loan rates are still considered better than those you will see elsewhere. It is also taken with the CDC loan, which is treated as a traditional property mortgage payment, with a fixed rate that can last 10, 20, or 25 years.
Source: SBA 504 Loans and Commercial Real Estate: What You Need to Know
What are the repayment terms for SBA 504 loans for hotels?
The repayment terms for SBA 504 loans for hotels are up to 25 years (fully amortizing) with a starting rate of prime + 1.25% to 2.75%. The loan to value is up to 90% LTC (80% on hotels and motels) and the minimum debt service coverage ratio is 1.20x. The loan is full recourse and assumable with a five-year minimum prepayment. Source 1, Source 2