Insider’s Tip: Secure An SBA Hotel Loan

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Having a tough time getting a bank loan for your hotel? That’s because many local and regional lenders are uneasy creating loans in an unstable economy and are often unfamiliar with national hotel franchising contracts.

Hotel projects that use brands certified by the US Small Business Administration (SBA) and the Franchise Registry receive a streamlined process and faster financing approvals, cutting months off the typical loan process.

“If you want to achieve hotel financing, the SBA is effective and highly proven,” stated Jack Heath, President and COO of Washington Trust, the oldest and largest privately owned commercial bank in the Pacific Northwest. “Hotel owners who work with brands who are pre-approved by the SBA franchise registry ensures the application can be processed more expediently and can streamline the approval process, resulting in a better chance of securing more money faster.”

Loan applications for franchises listed on the Franchise Registry can be reviewed and processed faster and more efficiently by the SBA and its lenders because the respective franchise agreements do not need to be reviewed in each individual situation.  Under this plan, SBA guarantees 75%-85% of the loan, which lowers risk to banks, increasing willingness to provide hotel loans based upon registered brands.

Affiliating your hotel with a major brand does not always have to be expensive. While the costs of franchising with most major brands can be high, between 15-25% of gross revenue, newer and more effective brands can be hired for 5% or less.

Basic requirements for an SBA loan:

  • Business must be eligible based on size.
  • Use of loan proceeds and the nature of the business (no lending, speculating, passive investment, pyramid sales, gambling, etc.)
  • Good character, have experience and good personal and/or business credit history.
  • Ability to pay back the loan.

What information will you need?

  • Personal and business credit history.
  • Financial statements for existing and startup businesses and as well as realistic projected financial statements.
  • Strong, detailed business plan.
  • Cash flow projections.

Choosing the lending institution carefully:

  • Stay away from larger banks.
  • Approach banks or lending institutions you have a relationship with, regional banks are the best.
  • Be thorough, bring everything in detail requested. Be overly prepared by doing more than expected on the paper process.

What is the range of SBA Loans?

  • They can range from 5k to 5 million, it is all based on the project at hand and the value of the business plan.

Good luck – now you know the insider’s way to secure an SBA loan for your hotel.

Published 23 May 2016

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