Due to the high profitability of the business, hotel and hospitality loans are one of the safest loan options for lenders. However, it can be surprisingly hard to get these loans.
Bank loans and Small Business Administration (SBA) hotel loans are the most common types of traditional hotel loans. These loans have strict standards for income, debt, and credit score.
A hard-money loan is the best option for hotels that can’t get a standard loan.
This hotel loan guide will show you how to get a loan for your hotel, what you need to do to get each type of loan, and how to find the best lender to work with on the next deal.
How do I get a hotel loans?
There are many loan options available today for investors and business owners looking to add a hotel to their portfolios.
With so many options, it’s important to know what you can get, such as the standards, loan limits, and lenders available.
These companies are not all the same. Do some research to make sure that the lender you choose has the right experience to help you get the loan you need.
Let’s look at three easy steps to get the right hard-money hotel loan to help you make these choices and think about these things.
1. Look into where you want to live.
Where you live is one of the most important parts of getting a hotel loan.
Most standard lenders are more interested in you and your finances. Hard-money lenders, on the other hand, look at the deal as a whole and decide if it makes sense.
Lenders who have worked with hotels before know how important location is, including how easy it is to get to, how much competition there is, and what attractions are close.
You should also find out how well the hospitality business in your target market is doing.
2. Build or buy? Look into your hotel financing choices.
Hotels can use funding for a wide range of properties, projects, and objectives, including
- There are cabins, hotels, motels, bed and breakfasts, and RV parks.
- Loans to buy or sell
- Commercial loans for bridges
- New funds for building
- Making changes or renovations
- Costs for business or big buying
Essentially, a hotel loan serves as a large business loan exclusively for purposes related to the hotel and industry.
Because of this, you will have a lot of freedom to make your dream investment come true.
You can use the loan to pay for big purchases or other business costs, to build a new hotel, to fix up an old one, or to get cash out of an existing property to put down on your new hotel.
Being clear about why you need the loan and making a good business plan and exit strategy will show the lender that you know what you need and how you will pay back the loan.
3. Get hotel loans.
There are three main types of hotel loans: bank loans, SBA hotel loans, and hard money loans.
Mortgage loans from banks
In the hotel business, banks are one of the most common places to get loans. However, these loans only work for people who have been in the business for a while and want to buy a big, well-known hotel or motel chain.
To get a standard bank loan, you must have good credit, a certain debt yield, and a net operating income. Many small business owners and investors may find it hard to meet these standards.
Then, business owners in the hospitality industry may look into SBA loans.
Small business loans
The hotel industry can use SBA-backed hotel loans for a variety of purposes.
There are two main types of SBA loans: the SBA 7a loan and the SBA 504 loan. Many people like these loans because they require less of a down payment and other upfront costs than traditional loans, but this comes with a price.
SBA hotel loans, like regular bank loans, typically have very strict rules about debt, income, property, years in business, and credit score.
To put it simply, they’re not easy to get either. For some people, it may be even harder to get one than a bank loan.
Loans for hard cash
How can people get money for their hotel business if they can’t get a regular bank loan or an SBA loan?
Another option that buyers and business owners frequently choose is hard-money lenders, who are often the best choice.
Lenders in this category are people, investors, or funding groups that give money to borrowers based on good sense and the deal’s value rather than strict rules.
They’re generally the best and most flexible choice for hotel loans because they can give money to a lot of different people, even those with bad credit or more complicated lending situations.
How hard is it to borrow money for a hotel?
Bank lenders and SBA-backed loans can make it hard to get a loan for a hotel.
In the event that you can’t meet the standards, they will not be able to give you the money you need.
Hard-money lenders, on the other hand, make it much easier to get a hotel loan.
Hard-money lenders care about how much the deal is worth and how you plan to pay back the loan. They also want to build genuine relationships with borrowers so that they can do business with them again and again.
Do you need a down payment for a hotel loan?
Most hotel loans require a down payment, depending on the loan arrangement.
For SBA loans, the down payment is between 10% and 15%. For bank loans, the down payment is usually up to 20%.
Because hard-money lenders are more skilled and flexible in how they set up loans, you may be able to borrow the down payment amount or roll it into the loan amount.
The requirements rely on how well you know the lender, how much experience you have, and how good the deal is overall.
Who gives money to hotels?
The Marquee Funding Group can assist you in finding a hard-money lender to finance your hotel business.
We are a team of smart real estate investors and loan originators with a lot of experience. We can set up mortgage choices for a wide range of business and owner-occupied loan situations.
We offer the following types of loans:
- Approvals on the same day.
- Getting up to seven days quickly
- Underwriting that makes sense
- From $50,000 to $20 million in loans
- Loan-to-value (LTV) ranges from 30% to 70%, depending on the deal.
- Loans for buying things
- We offer refinancing based on rate, time, and cash-out options.
- Both owner-occupied and non-owner-occupied homes can be used for work or pleasure.
- Loans for single-family homes, multi-family homes, businesses, factories, and land
- Ground-up, fix-and-flip, fix-and-occupy, and value-add.
If you’re ready to move forward, we hope our guide to hotel loans has helped you understand your choices.
Talk to our team right away about your unique real estate deal or how hard money works, especially if you’ve tried and failed to get a hotel loan from a traditional bank. We can help you with any kind of deal, no matter how easy or complicated it is. Send in your loan case right now.