Hotel Financing Using an SBA 7(a) Loan

Hotel financing through an SBA 7(a) loan is one method of getting into commercial real estate investment. It’s also an avenue for those who want to get into the hospitality business and own their own company. When it comes to hotel financing, there are really only a handful of viable choices, short of an outright cash purchase. Fortunately, there are some ways to obtain hotel financing, with good terms and conditions. Read on to learn more about hotel financing using an SBA 7(a) loan.

The SBA 7(a) loan-guarantee program is one that is backed by the federal government. However, it is important to note that the small business administration does not loan money directly by itself. Instead, these loan programs exist through various lenders, which adhere to Federal lending guideline standards. Hotel financing with an SBA 7(a) loan has the following parameters:

  1. Interest rate. The interest rate for these loans is capped at a maximum of between 4.75 percent and 6 percent, depending on the type of loan issued.
  2.  Term length. The amount of time to repay the loan also depends on its structure and for the type of purchase. For instance, business loans for things like expansion might last only a few years. But, for commercial real estate purchases, the loan term May extend up to as many as 25 years.
  3. Collateralization. For just about any type of loan, including an SBA 7(a) loan, collateral is usually involved, as is often a personal guarantee by the principal borrower.