These days it is tougher for the majority of banks and lenders to approve financing hotels. Hotel financing has become a lending area that most banks scaled back since the 2008 crash in the economy. That was because there were so many hotels because of over building and when the industry took a dive in 2008, lenders were stuck with a lot of defaulted loans on hotels.
Best options for financing hotels?
In today’s lending environment there are a few options that present themselves as good choices for hotel operators looking for hotel financing.
1. SBA financing
SBA financing continues to be one of the best options for financing hotels under their SBA 7a program. The type of hotels that most SBA lenders like to finance are franchised hotels or what the lender industry calls flagged hotels. They have a better track record in hotel lending. Under this program the hotel owner can enjoy lower down payment compared to conventional loans and can also enjoy favorable interest rates. The maximum interest rate any SBA lender can charge a borrower is 2.75 over the prime rate.
2. CMBS Loans
CMBS loan or commercial mortgage backed securities allow the hotel owner to apply for low fixed rate financing that is non-recourse. You can also refinance your hotel under this program and have unrestricted cash out capabilities. CMBS loans for financing hotels come with usually a 10 year fixed term going up to a 75% loan to value. One of the downsides to this type of financing is the pre-payment penalties and also the lender requirement to have payments go through a lock box facility to ensure payments are made on time.
These two options are among the best ways to complete hotel financing. To learn more about how BoeFly can help you obtain Hotel Financing from any of our 3,600 participating lenders, visit here!