A Step-by-Step Guide to Getting an SBA Hotel Loan

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Last quarterly update: Jan 3, 2022

With over 54,000 existing hotels in the United States, you may think the market is too big for you to start another hotel. However, you shouldn’t let that stop you from pursuing your dream. All you need to start are SBA hotel loans.

Once you get the money, you can build a new hotel or buy an existing one. Then, you can start and grow your business as a hotel owner.

Keep reading to learn how to get an SBA loan for your new venture.

Determine How You’ll Use the Money

First, you should figure out how you plan to use the loan money. You can use SBA hotel loans for various things, so you can use them to start or grow a hotel. Here are a few potential uses for the money:

  • Acquiring an existing hotel
  • Building a new hotel
  • Refinancing your current hotel
  • Working capital for your hotel business

As you decide how you will use the money, you can figure out how much money you will need. Then, you can apply for a loan that will cover all of your costs.

If you aren’t sure how much you will need, such as for working capital, you can make a guess. You can always overestimate so that you can make sure to get enough money.

Compare Types of Loans

Next, you can compare a couple of different types of SBA loans for hotels. While you may find one loan that sounds perfect, you should keep your options open as you apply.

You never know if you will get a loan, so don’t limit yourself. Instead, consider more than one loan program so that you have a backup in case your first choice doesn’t work out.

SBA 504 Loans

One type of loan to consider is an SBA 504 loan. It combines a traditional bank loan with money from a non-profit community development corporation. These loans usually offer lower interest rates and longer terms than some bank loans for hotels.

In general, you can only use the money from these loans for heavy equipment or commercial real estate. You can get a loan for up to $5.5 million, and interest rates tend to be about 5% to 6%.

The repayment term can last anywhere from 10 to 20 years, and loan fees are about 3% of the loan value. You may be able to include these fees with your repayment.

SBA 7(a) Loans

SBA 7(a) loans are one of the most common programs out there, and hotels can use these loans. Like 504 loans, 7(a) loans have longer repayment terms and low interest rates.

You can use the loan for almost any expense, from real estate to working capital. Loans can be up to $5 million, and some don’t have any fees aside from interest.

Interest rates are 2.75% plus a prime rate, which is about 5% to 10%. Loan terms can last anywhere from 7 to 25 years, depending on how you plan to use the loan.

Consider Loan Costs

When deciding what type of loan to get, you should consider how much it will cost. Aside from the loan amount, you have to calculate the interest rate that you will pay over the entire term.

But before you go for the lowest interest rate, compare it to the loan term. You may be okay with a shorter-term loan that has a higher interest rate because you’ll pay it off sooner.

You also need to think about any fees that might come with the loan. If you get a 504 loan, you also have to make sure that you will use the money for things the loan allows.

Verify You Qualify

Next, you should make sure you qualify for SBA hotel loans. Not meeting certain qualifications can be an easy way to have a bank reject your loan, so you should meet every qualification you can. Requirements may include:

  • Good credit history
  • Collateral
  • Business plan

You may also want to make sure you have enough cash flow to show the lender you can handle the loan. That way, you can prove that you will make payments on the loan money.

Organize Your Documents

Another important step for getting SBA hotel loans is to organize all of your loan materials. You may need to show include documents with your application to show the bank that you are trustworthy.

Documents include:

  • Your driver’s license
  • Business tax returns
  • Bank statements
  • Voided business check
  • Business plan
  • Property purchase agreement or deed
  • Profit and loss statements

When you find a lender, you should ask them if they require anything else. Then, you can put all of your documents together to make applying easier for you and your lender.

Apply for a Loan

Now, you’re ready to apply for some SBA hotel loans. You can start by applying to one loan program, but the program may not approve your application.

Apply for a few different SBA loans, and don’t be afraid to look at different bank loans for hotels. Then, you can increase your chances of one loan program accepting your application.

As you look for financing for hotels, consider the information you found earlier regarding loan amounts. If you need a large loan, you can narrow your search to programs that can handle that.

Review Your Options

Another important step in how to get an SBA loan is to look at your options once lenders get back to you. If multiple SBA banks accept your application, you can compare the loan amounts, interest rates, and terms.

Then, you can make sure to choose a loan that meets your needs. If none of the loan programs is the right fit, you can apply for more SBA loans until you find a program that works.

You want to make sure that your loan can cover any expenses you have so that you can fund your next purchase or upgrade. That way, you do not need to apply for another loan right away.

Getting SBA Hotel Loans

SBA hotel loans can help current and new hotel business owners fund their companies. You can use the money to purchase an existing hotel or construct a new one, but some loans have restrictions or extra costs.

Keep your loan needs and preferences in mind to help find the right loan program. Then, you can get the money you need to help build your business.

Are you ready to apply for SBA hotel loans? Find a lender today.

Top Flags (Franchises) receiving SBA Hotel Loans 

HotelAverage Loan# of LoansRateAvg TermTop States
Flagged Hotels$2,618,3085576.8%291
Unflagged Hotels$1,721,9362477.0%290
Motel 6$2,789,847536.6%297California, Texas
Quality Inn$2,756,800496.9%297Texas, Indiana
Days Inn$2,507,037437.0%297Colorado, Ohio
Red Roof Inn$2,483,183357.0%290Pennsylvania, Ohio
Super 8$2,051,006356.7%297Colorado, New York
Best Western$3,355,333336.6%299Texas, New York
La Quinta Inn$3,406,993296.6%275Texas, Georgia
Baymont Inn & Suites$2,333,710296.7%289Colorado, California
Econo Lodge$1,753,644256.9%291Georgia, South Carolina
Comfort Inn$2,680,996236.9%260Ohio, Virginia
Rodeway Inn$1,880,822236.8%299Florida, Georgia
Travelodge$1,727,794176.7%283Texas, Georgia
Ramada$3,316,786146.9%303Florida, Indiana
Americas Best Value Inn$1,625,315136.7%300Texas
Holiday Inn Express$4,082,442126.8%304Texas
Sleep Inn$2,798,210107.0%282Georgia
Knights Inn$1,576,14497.2%300
Country Inn & Suites$3,842,53887.2%302South Carolina
Wingate by Wyndham$2,533,57176.9%301Mississippi, Ohio
Comfort Suites$2,131,42976.6%252Texas
Hawthorn Suites$3,878,16766.7%301Ohio
Hampton Inn$2,867,96766.5%270Tennessee
Microtel Inn & Suites$1,708,80056.9%274North Carolina

Most Active SBA Hotel Lenders

RankBankCityState# of LoansAvg Loan $Avg Int
1Bank of GeorgeLas VegasNV53$2,621,8306.7%
2NOA BankDuluthGA47$2,160,1916.6%
3Bank of HopeLos AngelesCA45$1,761,4336.8%
4Open BankLos AngelesCA34$1,616,5216.7%
5Celtic BankSalt Lake CityUT33$2,161,0487.5%
6Readycap Lending, LLCBerkeley HeightsNJ32$1,880,0946.7%
7Seacoast Commerce BankSan DiegoCA28$2,131,1756.5%
8Poppy BankSanta RosaCA24$2,571,6007.4%
9United Midwest Savings BankDe GraffOH20$2,404,8706.9%
10First Western SBLCDallasTX19$2,078,7117.2%

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