As a result of the recession some hoteliers had a very difficult time securing financing and resorted to using seller carry back financing aka Owner Financing OR private money aka bridge loans to acquire properties. In the past these loans were completely eligible for refinance without restrictions through the SBA program as long as the borrower was never over 30 days late on any of the payments of the loan to be refinanced AND the loan to be refinanced is on a balloon term OR the new SBA loan will result in at least a 10% reduction of the monthly payments for the borrower. However, the SBA had to take on a more aggressive stance on the refinancing of Seller Carry aka Owner Financing and Private Notes aka Bridge Notes in the wake of many defaults and other related issues pertaining to private money or seller carry back notes paid off with SBA proceeds as a result of the terrible recession. Therefore, in 2013 the SBA adopted a loan program policy change that stated that PLP Lenders (aka Preferred Lenders Program) no longer had the authority to approve SBA 7(a) loans to refinance a seller carry note that is less than two years old. Also, this seller carry note must have been current for the past 24 months.

In addition, in 2014 the SBA adopted another loan program policy change that stated that PLP Lenders (aka Preferred Lenders Program) no longer had the authority to approve SBA 7(a) loans to refinance bridge loans or any other bank loans that were less 6 months old. Furthermore, this bridge loan could only be refinanced if the buyer was current on this bridge loan for the life of the loan, assuming that the bridge loan was for a term of less than two years.

At Hotel Business Capital we have had years and years of experience in working in the SBA and thoroughly understand that the SBA is an ever evolving program. We are constantly talking with our SBA contacts and are always well aware of policy changes the day they are made and sometimes are given additional insight as to potential oncoming changes. We consider this critical information and we share this information with our clients so that they do not potentially waste their time trying to procure SBA loan financing structures that will no longer work with SBA PLP lenders. Call us today if you have any questions about your next deal.

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