Most of the time borrowers who work with SBA lending companies just aren’t comfortable dealing with a local SBA lender not to mention if they are in an unstable market and those firms may not be familiar with hotel loans, and that includes hotel franchise contracts.
The best approach is to work on hotel projects that work with SBA preferred lenders and accredited by the small business administration (SBA). The borrower will always receive quicker processing times, faster closings and of course expert guidance during the entire loan process.
If you are looking to get your hotel financed, the SBA is probably the most effective means to get approved. If you are a Hotel owner who has multiple brands then being pre-approved by the SBA helps to make your SBA Loan process much faster. It can even help with making the final push for approval resulting in a better chance of closing the loan and getting your capital quickly.
The SBA Loan application for major hotel brands such as Courtyard By Marriott or Holiday Inn Express franchises that are approved by Franchise Registry, your sba hotel loan will be reviewed at a much faster rate than any other application. Because you are working with a preferred lender, you’ll have a higher percentage of approval because the lender has been through a lot of training and if they are wrong, their standing could then be questioned by the SBA and not just your application.
Borrowers with a good history of lending do get processed quicker and with less wasted effort by the small business administration and by the lender mostly because the individual franchise agreements do not need to be analyzed and reviewed in that particular circumstance. Supporting the borrower of this plan, the SBA will make assurances to provide up to 85% of the loan if there is a default, this lowers risk to the lender and improves the zeal to provide hotel loans based upon a franchise hotel brand.
Attaching sba hotel loans to flagship hotel franchise name does not invariably have to be costly. Although the expenses of franchising with most major hotel franchises can be as high as 25% of gross revenue, newer brands that may just be entering the marketplace, or larger, but still unknown names can be franchised for 10% or less.
The most critical points to remember is that the SBA is judging your request and the ability to pay the money back without falling into distressed. We suggest you follow these four guidelines to help you looking to secure SBA hotel loans:
1) You have to have a corporate structure and clear paperwork showing you are eligible to borrow a substantial amount of money, sometimes in the millions.
2) The funds you receive from the SBA are clearly being used to purchase a hotel and not being used to pay for other services from past ventures or to improve other properties not listed in the loan.
3) the borrower has to submit to a background examination both personal and business.
4) Of course, the most significant aspect of securing sba hotel loans is that you HAVE to show you can meet your monthly payments to the lender.
What paperwork do you need to prepare for SBA hotel loans?
What should you show your preferred SBA lender?
1) Get your credit history from the three major reporting agencies, both personal and business
2) Complete financial statements for your current business and the new hotel that you are looking to purchase.
3) The projected financials of the new hotel using conservative estimates always the best way to go.
4) A solid business plan that focuses on the management of the hotel as well as the experience that will be put into place. Most lenders approve or disapprove a loan based on this alone.
5) Determine to the best of your ability the cash flow that will be generated at the hotel.
6) watch these helpful SBA videos.
Picking the right SBA lending company.
It is the most underlooked aspect in applying for an SBA hotel loans.
Keep these points in mind:
1) Steer clear from the more massive lending institutions.
2) Reach out to lending institutions you have a history with or ones recommended by someone you know. Regional banks are a plus. One reason is that they can visit the property easier than a national lender.
Be meticulous, produce everything in an organized manner and make sure you bring precisely what is asked for. One tip is to go above and beyond for what they ask for, doing more than is expected shows willings to work for the loan and helps speed the process up.
How much funding will I have access to when applying for SBA hotel loans?
Most SBA preferred lenders try to stay above $500,000 and up to $5,000,000. These numbers are based on the type of hotel and upgrades you are looking to do to the property and the business plan that you submitted to the SBA.