SBA 7a Loan

The Small Business Administration – SBA 7a Loan is the loan that is most commonly used for a hotel purchase or a hotel refinance in today’s marketplace.  The SBA 7a Loan is a great loan for first-time buyers or experienced hoteliers because it is a very flexible loan with great terms and a low down payment requirement.

Here is an overview of a typical SBA 7a Hotel Loans:

  • Maximum loan amount of $5,000,000
  • Down payment as low as 15%
  • Interest Rates are tied to the Wall Street Journal Prime Rate Index (3.50% as of today’s date) + a margin no greater than 1.50-2.50%.
  • We are able to leverage our banking relationships to your benefit so we can help our clients get the best rates in the industry! 
  • Term of 25 years with 25 year amortization (aka Fully amortizing loan)
  • Prepayment penalty is very low and is 5% for Year 1, 3% for Year 2 and 1% for Year 3.  No penalty after year 3.
  • For hotel purchase: Down payments can be as low as 15%
  • For hotel refinance: Minimum of 15% existing equity in the property (aka Maximum Loan to Value of 85%)
  • FICO minimum of 640
  • First-time buyers are acceptable
  • Exterior hotels are acceptable
  • Independent (Non-Flag) hotels are acceptable
  • A “turn around” (aka under performing) properties (Provided the borrower has great hotel operational and ownership experience)
  • Nationwide lending in all markets

Our Banks want to do SBA 7a Loans! Here is why:

  • The federal government provides the bank with a 75% loan guaranty (aka insurance) on all SBA 7a Loans they make to borrowers.  This “insurance” helps to encourage the bank to make loans on hotels and other riskier property types that they would otherwise not lend against with traditional non-SBA conventional loans.
  • The SBA 7a Loan is much easier to get approved compared to traditional conventional non-SBA loans. The traditional non-SBA loans are hard to get approved because they have very stringent approval requirements such as a high cash flow requirement, minimum of 5 years previous hotel ownership experience and/or high down payment requirements to name a few. However, SBA 7a Loans are perfect for deals with a little “hair” on them such as limited historical cash flow, older property, limited management experience, spotty personal credit history to name a few.
  • Commonly, the banks sell off 75% of the loan (The guaranteed aka “insured portion” of the loan) within 1-2 months of loan closing. This generates income for the bank and also helps to reduce the bank’s capital risk and thus encourages the bank to make more SBA 7a Loans.
  • Thus, the SBA 7a Loan guaranty promotes the bank’s to make SBA 7a Loans to small business owners, which is the exact desired effect of the SBA. Per the SBA’s mission statement on their website they state that their mission is to, “…protect the interest of small business concerns…[as] small business is critical to our economic recovery and strength..”

Call HBC Lending today at 1-800-996-0794

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