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

Last quarterly update: Mar 23, 2024

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Typical hotel financing terms

Loan SizeUp to $5,000,000. Average hotel SBA loan is $2.4M
Loan Term25 years since real estate. 10 years for car wash equipment.
Interest RatesSBA interest rates are slightly higher than conventional loans: 9% – 10.5% in 2023.
Down Payment10% to 20% down payment is common, but SBA is enacting lower thresholds in August 2023.
Cash Flow Profits (EBITDA) of at least 115% of SBA loan payment. SBA loan payment calculator –>
Collateral
None required but lender must secure all available collateral.

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Top Lenders for SBA Hotel Loans

RankBankCityState# of LoansAvg LoanAvg Rate
1GbankLas VegasNV58 $ 3,152,2749.0%
2Bank of GeorgeLas VegasNV58 $ 3,152,2749.0%
3Home Loan Investment BankWarwickRI24 $ 3,131,6889.9%
4US Metro BankGarden GroveCA22 $ 3,074,0919.5%
5Millennium BankDes PlainesIL18 $ 3,496,4009.9%
6First Western SBLCDallasTX17 $ 2,193,0599.6%
7Peoples BankMendenhallMS17 $ 2,587,25310.0%
8Readycap Lending, LLCBerkeley HeightsNJ16 $ 2,824,1889.8%
9Wallis BankWallisTX16 $ 2,664,9069.5%
10Bank of HopeLos AngelesCA15 $ 2,895,1479.2%
11Enterprise Bank & TrustClaytonMO15 $ 3,264,0878.3%
12Open BankLos AngelesCA13 $ 3,345,2319.5%
13Celtic BankSalt Lake CityUT11 $ 2,791,98210.0%
14East West BankPasadenaCA9 $ 1,990,5569.6%
15Hanover Community BankMineolaNY8 $ 2,943,3759.7%
16United Midwest Savings BankDe GraffOH8 $ 2,701,2509.8%
17First Chatham BankSavannahGA7 $ 2,242,9009.8%
18Woori America BankNew YorkNY6 $ 3,496,6678.9%
19CenterStone SBA LendingLos AngelesCA6 $ 2,567,1339.9%
20PCB BankLos AngelesCA6 $ 2,320,7509.0%

Recent hotel financing activity

IndustryYearQtr# of Loans Avg LoanAvg Rate*
Hotels (except Casino Hotels) and Motels20234170 $2,740,2769.9%
Hotels (except Casino Hotels) and Motels20233157 $2,781,0379.7%
Hotels (except Casino Hotels) and Motels20232156 $2,557,3269.5%
Hotels (except Casino Hotels) and Motels20231141 $2,537,5029.2%
Hotels (except Casino Hotels) and Motels20224185 $2,602,0298.0%
Hotels (except Casino Hotels) and Motels20223258 $2,647,6236.9%
Hotels (except Casino Hotels) and Motels20222254 $2,717,2205.3%
Hotels (except Casino Hotels) and Motels20221227 $2,657,2665.0%
Hotels (except Casino Hotels) and Motels20214111 $2,492,0865.0%
Hotels (except Casino Hotels) and Motels20213581 $2,556,5945.0%
Hotels (except Casino Hotels) and Motels20212285 $2,329,9015.0%
Hotels (except Casino Hotels) and Motels20211151 $2,339,5655.1%

* Note that most SBA loans are variable-rate loans. The rates listed above is the initial interest rate at loan closing. Variable-rate SBA loans fluctuate by the fed funds rate set by the Federal Reserve.


Top Flags (Franchises) receiving SBA Hotel Loans 

HotelAvg Loan# of LoansInterest RateTop States
Flagged2,850,4389525.0%Texas, Georgia, California
Unflagged1,635,2344205.0%Texas, California, Georgia
Super 81,998,453865.1%Texas, Illinois, Indiana
Quality Inn2,754,303755.0%South Carolina(8), Florida, Georgia
Motel 62,581,227715.1%California, Texas, Georgia
Best Western3,399,722694.9%Texas, California, North Carolina
La Quinta Inn4,070,024625.0%Texas, Florida
Days Inn2,222,560614.8%Texas, North Carolina, Georgia
Red Roof Inn2,569,712495.2%Georgia, Texas, Indiana
Econo Lodge1,682,586495.1%Pennsylvania, Michigan
Comfort Inn3,725,526424.9%Texas, Georgia, Ohio
Holiday Inn Express4,579,293274.7%Texas
Baymont Inn & Suites2,432,311275.2%
Americas Best Value Inn2,125,587235.0%Texas
Sleep Inn3,261,060205.1%South Carolina
Country Inn & Suites By Carlso3,388,632194.9%
Rodeway Inn2,222,153195.0%
Comfort Suites3,761,911194.9%Texas
Travelodge2,013,850184.8%California
Hampton Inn3,709,800175.2%
Ramada2,514,853155.0%
Fairfield Inn by Marriott4,453,543144.7%Texas
Microtel Inn & Suites by Wyndh3,207,936144.9%
OYO – Marketing and Operationa1,196,167125.1%
Clarion3,173,817125.0%
SureStay2,667,409114.8%
AMERICA’S BEST INNS & SUITES1,860,360105.4%Texas
Studio 62,285,66794.9%Texas
Hampton Inn & Suites3,840,31474.8%
Knights Inn2,253,42975.4%
Wingate by Wyndham3,734,16764.6%
Red Lion Hotels2,295,20064.9%
Howard Johnson2,778,75045.2%
Holiday Inn4,592,50044.7%
HomeTowne Studios by Red Roof/2,471,45045.3%
Candlewood Suites4,113,25044.7%

Hotel Loan FAQs

Can I use an SBA loan to acquire an hotel?

Absolutely, SBA loans are frequently used to acquire and/or renovate hotels. One of the best attributes of motel/hotel SBA loans is the loan term is 25 years.

What are the key criteria for obtaining a hotel SBA loan?

We cover SBA acquisition loans, cash flow, and SBA loan eligibility criteria and required documents in other articles. We encourage all potential SBA borrowers to review those articles. Specifically related to hotel business loans, here are the main reasons we see borrowers have their hotel loan denied:

  • Lack of sufficient cash flow
  • Entrepreneur does not have direct experience in the hotel industry
  • Weak flag or independent – Most hotel lenders want a strong hotel franchise to minimize their risk. Hotel with perceived weak flags or independent hotels (non-flagged) may still obtain financing if the historical cash flows are strong (excluding the Covid years) or if the property is unique, such as a exclusive hotel that has been in business for decades in a popular tourist area. Hotels can be widely profitable businesses with high occupancy rates, so bankers will focus on historical occupancy rates.

Which hotel SBA loan program is better – 504 or 7a?

The vast majority of loan requests we see are for 7a loans, which typically are much faster to obtain and qualify for than 504 loans. We can introduce you to 504 lenders, but we recommend trying the more popular SBA 7a loan program first, especially if you are time-sensitive.

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 or renovating 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 Hotel 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. SBA hotel 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 10 to 25 years, but over 90% of all SBA hotel loans are for 25 years since real estate is the collateral.

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.

Getting SBA Hotel Loans

SBA hotel financing 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.

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Top Flags (Franchises) receiving SBA Hotel Loans 

HotelAvg Loan# of LoansInterest RateTop States
Flagged2,850,4389525.0%Texas, Georgia, California
Unflagged1,635,2344205.0%Texas, California, Georgia
Super 81,998,453865.1%Texas, Illinois, Indiana
Quality Inn2,754,303755.0%South Carolina(8), Florida, Georgia
Motel 62,581,227715.1%California, Texas, Georgia
Best Western3,399,722694.9%Texas, California, North Carolina
La Quinta Inn4,070,024625.0%Texas, Florida
Days Inn2,222,560614.8%Texas, North Carolina, Georgia
Red Roof Inn2,569,712495.2%Georgia, Texas, Indiana
Econo Lodge1,682,586495.1%Pennsylvania, Michigan
Comfort Inn3,725,526424.9%Texas, Georgia, Ohio
Holiday Inn Express4,579,293274.7%Texas
Baymont Inn & Suites2,432,311275.2%
Americas Best Value Inn2,125,587235.0%Texas
Sleep Inn3,261,060205.1%South Carolina
Country Inn & Suites By Carlso3,388,632194.9%
Rodeway Inn2,222,153195.0%
Comfort Suites3,761,911194.9%Texas
Travelodge2,013,850184.8%California
Hampton Inn3,709,800175.2%
Ramada2,514,853155.0%
Fairfield Inn by Marriott4,453,543144.7%Texas
Microtel Inn & Suites by Wyndh3,207,936144.9%
OYO – Marketing and Operationa1,196,167125.1%
Clarion3,173,817125.0%
SureStay2,667,409114.8%
AMERICA’S BEST INNS & SUITES1,860,360105.4%Texas
Studio 62,285,66794.9%Texas
Hampton Inn & Suites3,840,31474.8%
Knights Inn2,253,42975.4%
Wingate by Wyndham3,734,16764.6%
Red Lion Hotels2,295,20064.9%
Howard Johnson2,778,75045.2%
Holiday Inn4,592,50044.7%
HomeTowne Studios by Red Roof/2,471,45045.3%
Candlewood Suites4,113,25044.7%

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.

The small business hotel financing market has improved over the past year. But the resiliency of the hotel capital markets has been impressive given the devastating impacts of Covid and the overall decline in general in hotel SBA lending prior to Covid. Hotel loans closed the last few years:

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.

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