Hotel Construction Loans
Hotel construction financing necessitates specialized knowledge and experience. At Hospitality Funding, we can source hotel construction loans and capital solutions to fit your project needs and requirements. As hotel financing experts, we coordinate with top hospitality lenders to connect you with bridge loans and mezzanine loans to help you get hotel funding more quickly and easily. Contact us today for assistance in obtaining hotel construction loans, and read on below about how hotel construction financing works.
Hotel Construction Financing
Hotel construction loans and financing can be complicated and difficult to obtain. Hospitality Funding has the specialized knowledge and experience required for hotel construction financing, planning, and execution. We strive to maximize leverage in any construction scenario and are known for being innovative in combining a senior loan with a mezzanine loan to increase proceeds while reducing equity investment. If you’re wondering if you can get a loan to build a hotel, you’ve come to the right place.
The hotel loans that are available for your construction project may differ depending on a number of factors, including:
The level of experience your company has in the hotel and hospitality industry.
The amount of equity available to back up your project.
Your own monetary contribution to the construction.
Types of Hotel Construction Loans and Financing
Hotel Conversion Financing
Hotel conversions are a type of hotel renovation in which a hotel changes flags or a non-flagged property becomes flagged. Conversions of managed hotels are typically financed by the parent corporation, whereas franchise conversions are typically refinanced through the franchisor. However, in some cases, such as when a flagged hotel becomes a non-flagged one, a hotel conversion may necessitate the use of outside funds.
Hotel Renovation Financing
Hotel renovation financing is used to pay for improvements that increase the hotel's value and lifespan. Though it is possible to self-fund renovations by segregating operational cash flows into renovation reserve accounts, many, if not most, hotels prefer to finance hotel construction renovations externally. PIP obligations require franchisees to keep hotels up to brand standards, which can necessitate significant renovation funding.
Hotel construction loans non recourse
Hotel construction loans with no recourse can increase a hotelier's borrowing capacity. A bank or finance company, for example, may have a team of CMBS lenders who will go out and book a loan on a balance sheet and then sell the loan after it closes. On the back end, a bond sale funds loans. Similar to a cmbs loan, the risk of the loan is passed on to a number of different parties due to the way it is structured. Commercial mortgage-backed securities are combined and sold on the secondary market, and lenders are willing to offer these nonrecourse loans because they face less risk. If the borrower defaults, only the property is at risk. Non-recourse hotel construction loans can provide a clean personal balance sheet, freeing up capital for other refinancing and acquisition financing options. They can also make borrowers more appealing to lenders, allow lenders to look past previous financial difficulties, and provide the option to add mezzanine debt to increase leverage.
hotel construction bridge loan
Bridge loans are designed to bridge the gap between the purchase of a new property and the completion of permanent hotel loans to finance that property. These loans are considered to be a little riskier, and they may have a higher interest rate than comparable arrangements. These loans are typically closed much faster than traditional lenders, allowing a buyer to acquire, renovate, and stabilize the hotel property until permanent financing can be obtained. Whether purchasing a property or refinancing existing debt, a client can be confident in our ability to close the transaction quickly and access the capital required to complete the acquisition, renovation, or brand conversion.
hotel mezzanine debt financing
A mezzanine loan of subordinated debt is another source of hotel construction financing. On the capital stack, mezzanine debt financing is located below senior debt and above equity. Mezzanine financing is a hybrid of debts://www.turbodebt.com/ and equity financing that grants the lender the right to convert to ownership or subordinate debt in the company if the senior lender is not paid.
hotel construction loans sba 504
SBA hotel loans are loans made available through one of the US Small Business Administration's various loan programs and used to build, acquire, refinance, or gain working capital for a hotel business. Contrary to popular belief, principal funding for SBA loans is not provided directly by the Small Business Administration. Rather, the SBA collaborates with approved lending partners, such as local and national banks, non-bank lenders, and nonprofits, to guarantee a portion of the loan proceeds in the event of a borrower default. SBA 504 loans, despite being one of the most complicated loan products on the market, can be appealing options for hotel financing due to fixed rates and larger loan amounts. This makes them highly desirable products, especially given that the funds can be used for purchase, construction (including land), expansion, renovation, and equipment/furniture.
hotel construction loan terms
The terms of a hotel construction loan will vary depending on the borrower's situation. Many hotel construction loans have terms ranging from 24 to 48 months, with the option to extend the loan beyond the initial maturity date. Following construction completion, owners typically refinance the loan and obtain traditional financing at a lower interest rate. At Hospitality Funding, we understand that each transaction is unique and will be able to advise you on the best hotel construction loan term for your project.
hotel construction loan term sheet
Once we have completed our entire process, we will present a financial proposal in the form of a full hotel construction loan term sheet. This term sheet is provided solely for discussion purposes and will serve as an initial description of the possible terms of the proposed financing, which terms are subject to further review, analysis, consideration, and final approval by the bank. Before submitting this request for approval, additional terms and conditions may be required.
We will find a capital solution for your project if one exists. We cover hotel construction loans for all types of hotels, including full-service, select-service, boutique, and ground-up hotel development. Get in touch with us today to learn more about how we can assist you in hotel financing services for your next project.