Hotel Loans

Two type of lenders for Hotel Loans: 1) Portfolio and 2) Commercial Mortgage Backed Securities (CMBS) lenders.

For the most part a portfolio lender holds the loan on their books.  Banks, Credit Unions are examples of portfolio lenders.  It might be the portfolio lender will participate part of a loan with another bank or credit union.  It is also possible they sale a portion of the loan but most often retain servicing when financing with the Small Business Administration (SBA).

SBA 7a and 504 Loan Programs:

Portfolio lenders can take advantage of the SBA and provide recourse loans up to 85% of the property value.  SBA guaranty is limited to $5 million (higher if energy efficiency requirements are met).   The 7a is when the lender closes the hotel loan and the SBA provides a limited guaranty to the originating lender.  Often this SBA guaranty is 75% of the hotel loan amount, with the SBA guaranty limited not to exceed $5 million.

The SBA 504 program:

You have two lenders in a SBA 504 loan.  The first mortgage lender (e.g. bank or credit union).  The fist mortgage lender will lend up to 50% of the value of the property with the SBA agreeing to fund the next 35% with the owner providing 15% equity.  The first mortgage hotel loan is normally committed to no less than 10-years under a floating rate (e.g. spread over US Treasuries or over Wall Street Journal Prime).  The SBA 504 is a true second mortgage with fixed rates on 20 and 25-year plans.  These rates are published monthly.  These hotel loans require full recourse from the investors.

Life Companies:

Some Life Insurance Companies will issue low long term fixed rates for hotel loans.  They generally want major metropolitan cities, major flagged property, experienced operators and leverage not exceeding 60%.  Normally, the life company lender will offer the lowest interest rates, best prepayment penalty options and least restrictive post closing.  They also are non-recourse lenders.

Commercial Backed Securities (CMBS):

A CMBS loan is a good option to consider when a non-recourse hotel loans are desired, need leverage closer to 65% vs 60% and you want a 30-year amortization.  The loan documents and post-closing requirements can be restrictive.  One should weigh the advantages over portfolio lenders when considering a CMBS loan.  CMBS loans are sold into large loan pools.

Buying your first hotel, looking a major acquisition or portfolio purchase we can help select the best loan product that will best fit your objectives. See sample commercial loan rates for hotels.

On our web site you can read about specific loan products: www.caffreyloans.com/loan-products, offered by Freddie Mac, Fannie Mae, HUD/FHA, Commercial Mortgage Back Securities (CMBS) and other loan products. Want more details on sample interest rates for apartment check out Interest Rates for Apartment Loans also on our web site: www.caffreyloans.com/apartment-loans.

Have a question please contact
Mike Caffrey
Telephone: (913) 402-7077
Mike@CaffreyLoans.com
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