What is a hotel or motel loan?
A hotel or motel loan is a type of commercial mortgage that liens a specific classification of hospitality property. Several other hospitality property types exist, such as bed & breakfasts, resorts and RV parks and would require commercial loans. Borrowers can get a hotel/motel mortgage for a variety of purposes, including any of the ones listed below:
- To finance a hotel purchase
- Refinance a hotel
- Refinance to get cash out of the property
- Fund the construction of a new hotel
- Rehab and/or remodel
- Acquisition and development
- Reposition the property in the market
Why do I need a hotel or motel loan?
Borrowers typically explore getting a hotel loan when they want to purchase a hotel or refinance a hotel mortgage they already have. While many hotel loan mortgages fall into these two main buckets, there are several specific reasons to get a hotel loan, such as to:
- Reserve capital for other uses
- Supplement available cash
- Get hotel bridge financing until permanent financing becomes available
- Position the property for profitability
- Stabilize a distressed property
- Fund large projects that require unique financing arrangements like mezzanine, bridge loans and joint ventures
- Refinance an expiring term loan
What are common types of hotel loans?
Hotel projects can vary greatly, with factors like size, cost, timeframe, level of construction and many more dictating the specifics that are input into the hotel loan underwriting guidelines. While hotel loans come in many varieties, here are some common types of hotel loans.
- 90% LTV for purchases
- SBA 7(a) loans
- SBA 504 loans
- Hotel bridge loans up to 65% LTV
- Loans from $100,000 to $100,000,000
- Hotel financing rates from 6.99% to 12%
- Cash-out first or second mortgage
- Properties that do not cash flow
- Mixed-use allowed
- Fully amortized
- Full documentation
- No doc equity loans
- USDA Business & Industry
- Private, non-bank loans
- Hard money
- Conventional permanent financing
- Acquisition and development
- Construction loans
- Hotel refinance loans
- 100% LTV for expansion
- 75% ARV rehab loan
- No prepayment penalty
What is a hotel or motel hard money loan?
Hard money loans for hotels and motels are offered by private lenders or non-banks and provide several benefits, such as fast funding (just a few days to a couple of weeks) at lower LTVs, and they require less documentation from the borrower than a bank would need. In exchange, these loans are typically repaid over just a few years and come with higher interest rates than conventional hotel loans. Hard money loans are equity based, meaning that LTVs of 50% to 65% are common.
What is a hotel or motel construction loan?
Though much less common than other types of hotel and motel mortgages, construction loans are available for borrowers planning to build a new hotel or motel. Hotel construction loan terms will vary, depending upon the borrower’s scenario but you can see typical types of construction loans below:
- SBA hotel construction loan
- USDA B& I construction loan
- Bridge loan or cash-out mortgage to remodel a hotel or motel
- Bridge loan or cash-out mortgage to finance the rehabilitation of a distressed hotel or motel
- 12 to 60-month loans while under construction
- Construction take-out loan
- Construction to permanent financing
Do many lenders offer hotel and motel loans?
Yes, many bank, non-bank and private lenders offer financing options for hotels. Plenty of lenders have loan programs for flagged and un- or non-flagged motels and hotels. If you are a hotel loan broker, use LenderSearch.com to see how many lenders would be able to finance your client’s particular hotel or motel project. All the lenders on featured on Scotsman Guide’s Lender Search work with mortgage brokers to secure funding for their clients.