We at HBC only work with banks that will provide our clients with Working Capital as a part of the SBA loan proceeds. Why is this important? Working capital is very important as it is the “start up” capital you will need for your business right after you close on the purchase of your hotel. Working capital can assist in covering immediate operating expenses of the business such as salaries or hotel supplies. Also, it can also be used for an advertising “blitz” to increase business at the hotel. How can Working Capital effectively lower my actual down payment on the loan? Working capital is a work around way to decrease a buyers actual down payment. For example, if the total purchase price of the hotel including all closing costs and working capital is $3,000,000 then the buyers down payment at closing would be $450,000 (15%). However, if the bank included $50,000 of working capital in the loan then the buyer would get this $50,000 right back to the buyer immediately after the close of the purchase. Therefore, the buyers actual down payment after closing would be $400,000. This calculation would be $450,000 down payment to escrow minus $50,000 given to the buyer by the bank in Working Capital immediately after the loan closes. This would effectively decrease the buyers actual down payment from 15% to 13%. At HBC, we have extensive underwriting backgrounds, which helps us structure deals to help our clients get the lowest down payment possible from the bank. Please call us today if you would like to discuss how we can save you or your client on down payment cost on your next deal.

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