504 Loan Hotel & Motel Financing - Including Renewable Energy Installation
SBA 504 financing can be used to purchase, remodel or refinance a hotel or motel, and it can also be used to acquire renewable energy equipment to meet your property's power needs. See "Solar Power Financing" below for more details.
SBA Hotel Financing - State of the Current Market:
- Hotel financing for new construction is available for very strong projects in the current economic environment, but hoteliers need significant ownership and management experience.
- Hotel acquisition financing for qualified buyers for properties that are doing well is much more possible than new hotel development.
- Refinancing is now possible for existing properties using the 504 program if you plan to do a major expansion/renovation, and refinancing is possible up to $2 million with an SBA 7a loan, although a $5 million SBA 7a refinance and an SBA 504 refinance without an expansion may be available late Summer or early Fall 2010. (Please call us for details).
504 Hotel Financing Highlights
- Loans up to $10 million+* *
- Very low rates and long term financing
- Minimum 15% down payment or equity injection
- Increased SBA Eligibility if you Go Green
- Available for New Construction, Purchase or Purchase and Remodel
- Available for Refinance or to refinance and renovate an existing hotel or motel.
*More About Refinancing
If you own a hotel or motel and are interested in refinancing to get better terms and you can meet the SBA's new requirements for an "expansion" then a refinance may be possible.
Click here: SBA 504 Refinance to find out more about the new refinance option.
SBA Hotel Financing - More Specific Information
- Traditionally SBA Hotel Loans maxed out at about $3.5 million, but recent changes to 504 program allow loans of up to $10 million+ if you can reduce your energy consumption by 10% or if you can produce some of your own energy. For more information about energy efficiency and green energy please visit our Green 504 Loan page.
- Another recent change to the 504 program allows larger, more profitable businesses to qualify for the program. Businesses can now have a net worth up to $8.5 million, and net (after tax) income of up to $3 million although the "Small Business Lending Bill" change increase these limits dramatically allowing many more successful hoteliers to finance more or larger properties.
- If you are building or refinancing a hotel or motel and you have the ability to make the property 10% more energy efficient (and qualify for the Green Benefits of the 504 Loan as mentioned above) than you may be eligible for more SBA financing. In other words, if you already own a hotel or motel and you have SBA financing on that property, "going green" could increase your SBA eligibility and allow you to finance another property.
- "504 loans" actually consist of 2 loans - a first mortgage provided by a lender and a second mortgage guaranteed by the SBA. The first mortgage is typically amortized over 25 years and is usually fixed for 5 years at a time. The second mortgage is a 20 year fixed rate that never adjusts. The combination of the 2 loans gives you the lowest possible commercial financing available.
- Hotels and Motels require a 15% down payment or equity injection since they are considered "special use" properties by the SBA. "Special Use" means that the hotel is specifically built to be a hotel and could not easily be converted for another type of business use. (Land value can be used at current value for equity if owned for 2 years or more).
- "Going Green" also gives you significant tax deductions in most states since almost all states (and the Federal Government) have created major tax advantages for companies that adhere to green building and energy efficient guidelines. (There is currently a 30% Federal Grant for renewable energy "property" that can be used towards your down payment/equity injection).
- The SBA 504 program also provides financing that allows you to purchase and renovate an existing hotel. So if there is an older hotel that you would like to purchase and renovate you can use the 504 program to finance both the acquisition and any modifications to the new property...and possibly at 85% loan to cost since the 504 allows you to finance closing and soft costs.
- Similarly, the 504 loan provides financing to refinance and renovate or expand an existing hotel or motel, so if you currently own a property and it needs updating or if you need to expand it, you can use the 504 to finance the renovations.
Solar Power Financing for Hotels
Solar panels, for instance - either roof mounted or on the ground - can be financed with a "green 504 loan" since the program allows financing of equipment with a useful life of 10 or more years. (Solar panels are eligible since they are expected to last up to 25 years).
There are also numerous federal and state grants and incentives available including a 30% federal grant for the purchase of renewable energy or solar equipment. The grant is assignable to the lender for part of the down payment/required equity injection and there is no limit on the amount of the grant. For instance, if you were to do a $1 million solar module installation on your existing property you would receive a grant from the US Treasury of $300,000 that could be counted towards your down payment.*
The grants available from some states are actually larger than the federal grant and in New Jersey, PA, NC and other states there are SRECs and/or "renewable energy credits" that might be enough to qualify for the loan.
Solar Thermal Energy is also ideal for hotels given the amount of hot water used for showers, laundry facilities and pools.
Please contact us at 1-800-414-5285 to see how truly feasible this. You might be able to save thousands of dollars per month and possibly create positive cash flow depending on the size of the installation.
The SBA 504 is ideal for, but not limited to, flagged, limited service hotel and motel franchises like the following:
Best Western
Comfort Inn
Comfort Inn & Suites
Country Inn & Suites
Courtyard Inn
Days Inn
Fairfield Inn
Four Points
Hampton Inn
Hilton Garden Inn
Holiday Inn Express
Quality Inn
Ramada Inn
Sleep Inn
Super 8
Please contact us at 1-800-414-5285 to find out more about our expertise with SBA 504 hotel and motel financing.
*Please check with your accountant and the proper parties to verify eligibility and tax deductibility.
**Larger loans are available if your property meets energy efficiency guidelines or uses enough renewable energy to qualify.
