Hotel renovation financing is something that can be done with either a government-backed loan or through private lending sources. Of course, each product has its pros and cons. So, it’s very important to understand what’s involved, the limitations, requirements, and advantages. Read on to learn more about hotel renovation financing and what you need to know.
Hotel renovation financing is a way to upgrade facilities without having to pay cash out of pocket. (Unless you have the capital to spend upfront, that is.) Now, here’s a quick breakdown of hotel renovation financing options currently available to hospitality establishment owners:
- SBA 7a loans. One of the most attractive debt instrument products is Small Business Administration loans. Although the government itself does not directly loan money to borrowers, it does set standards, requirements, and guidelines for various approved lenders. SBA 7a loans are for the purchase of the commercial real estate, running to a limit of $5 million, with terms that can last as many as 25 years.
- SBA 504 loans. Another government-backed loan is SBA 504 loans, which have larger lending limits — up to $20 million — but the term lengths are shorter, ranging from 10 years to 20 years.
- Traditional bank loans. Commercial lenders, including national and international banks, do offer loans for hospitality establishment owners for renovation purposes. These require a good amount of pre-planning and documentation but have more options than government-backed loan products. Interest rates and terms will vary but are generally competitive, and collateral, along with a personal guarantee, are usually required.