Hotel Loans and the SBA 7a Loan - A Solid Fit
As the credit crisis continues to take its toll on all commercial mortgages, hotel loan options have become even more limited than normal.
This of course is nothing new or a big surprise to those that are involved in the industry, as historically this building type comes in and out of favor with lenders dramatically.
For hotel loans under $3,000,000, the SBA 7a loan program has become one of the leading sources of capital for acquisition AND refinances as it is still a very viable option (meaning these loans are still closing).
And rates are currently in the 5%'s for many borrowers.
First of all, some borrowers shy away from this loan program for 2 reasons.
1.
This loan comes with a floating rate (most of the time) 2.
The SBA guarantee fee is expensive (most of the time).
Note that some banks do offer this as a fixed rate.
For example, we work with two banks that offer this as a 5 year fixed, 25 year amortization loan.
We had a bank out of New York that offered this as a 10 year fixed program but, unfortunately that has gone away.
And the rate is normally Prime plus .
75 -1.
5% (as of this writing prime is at 5%).
As far as the SBA guarantee fee, which is 2.
75% of 75% of the total loan amount, that can as be paid for by the bank as well, if they so choose to.
It's interesting to note, about the floating rate, that it is actually at the discretion of the bank and not something demanded or directed by the SBA, as is often implied.
Also, regarding refinances.
Most people are under the impression that you cannot refinance with any SBA loans.
Actually it is not that difficult to qualify for, you need only one of the following.
Your existing rates floats or 2.
Your loan has a balloon clause on it or 3.
By refinancing you can reduce either your rate by 2% or your mortgage payment goes down by 20% (on a cash flow basis) with the new SBA loan.
Anyone of the above will qualify you for a refinance with the SBA 7a program.
Of course, the classic benefits with either the 504 or SBA 7a program is the high level of leverage - 85% on purchases or refinances on hotels.
It is worthwhile to point out that the 85% financing can be 85% of the purchase or 85% of the total project costs.
For example, say you were purchasing a hotel for $1,000,000 and needed an additional $500,000 for renovation,you could finance 85% of the $1,500,000 keeping valuable cash in your business.
All in all, it's highly recommended to take a hard look at the SBA 7a program for your next hotel loan.
This of course is nothing new or a big surprise to those that are involved in the industry, as historically this building type comes in and out of favor with lenders dramatically.
For hotel loans under $3,000,000, the SBA 7a loan program has become one of the leading sources of capital for acquisition AND refinances as it is still a very viable option (meaning these loans are still closing).
And rates are currently in the 5%'s for many borrowers.
First of all, some borrowers shy away from this loan program for 2 reasons.
1.
This loan comes with a floating rate (most of the time) 2.
The SBA guarantee fee is expensive (most of the time).
Note that some banks do offer this as a fixed rate.
For example, we work with two banks that offer this as a 5 year fixed, 25 year amortization loan.
We had a bank out of New York that offered this as a 10 year fixed program but, unfortunately that has gone away.
And the rate is normally Prime plus .
75 -1.
5% (as of this writing prime is at 5%).
As far as the SBA guarantee fee, which is 2.
75% of 75% of the total loan amount, that can as be paid for by the bank as well, if they so choose to.
It's interesting to note, about the floating rate, that it is actually at the discretion of the bank and not something demanded or directed by the SBA, as is often implied.
Also, regarding refinances.
Most people are under the impression that you cannot refinance with any SBA loans.
Actually it is not that difficult to qualify for, you need only one of the following.
Your existing rates floats or 2.
Your loan has a balloon clause on it or 3.
By refinancing you can reduce either your rate by 2% or your mortgage payment goes down by 20% (on a cash flow basis) with the new SBA loan.
Anyone of the above will qualify you for a refinance with the SBA 7a program.
Of course, the classic benefits with either the 504 or SBA 7a program is the high level of leverage - 85% on purchases or refinances on hotels.
It is worthwhile to point out that the 85% financing can be 85% of the purchase or 85% of the total project costs.
For example, say you were purchasing a hotel for $1,000,000 and needed an additional $500,000 for renovation,you could finance 85% of the $1,500,000 keeping valuable cash in your business.
All in all, it's highly recommended to take a hard look at the SBA 7a program for your next hotel loan.
Source...