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SBA 504 Hotel Loans

Unlocking Growth Opportunities for Hoteliers with SBA 504 Hotel Loans


Updated: 12/19/2023


Please find the official SBA 504 website here:


Looking to expand your hotel business? GHC Funding offers SBA 504 hotel loans tailored for growth and development in the thriving hospitality industry. With a revenue totaling $189 billion in 2022, seizing these opportunities becomes pivotal for hoteliers.


 

SBA 504 Loans for Hotel Growth

Wondering if a 504 loan can be used for a hotel? Absolutely! These loans are designed to fuel expansion, whether you're expanding your hotel, enhancing facilities, upgrading equipment, or renovating rooms to elevate your business standards.


Hoteliers can access up to $5 million through the SBA 504 loan for various purposes such as real estate acquisition, building construction, or procuring necessary equipment like laundry machines or restaurant appliances. Beyond traditional hotels, this financing extends to motels, resorts, and bed-and-breakfasts, broadening the scope for diverse hospitality properties.



 

SBA 504 Green Program

By opting for the SBA’s Green Program, hotel owners can access even more substantial funds, up to $16.5 million throughout the hotel's lifespan, with a cap of $5 million per qualifying project. To qualify, energy efficiency measures are required, such as reducing energy consumption by 10%, transitioning to structures that consume 10% less energy, or incorporating alternative energy sources like wind, solar, or geothermal power.


 

Qualification: SBA 504 Loans for Hotels

To qualify for an SBA 504 loan for hotels, businesses must be for-profit entities with tangible net worth below $15 million and an average net income of less than $5 million after taxes over the past two years. These loans can be utilized for real estate, building construction, or purchasing essential equipment. Embracing the SBA 504 green loan entails adhering to specific energy efficiency criteria.


The SBA 504 loan program for hotels is designed to support growth and development within the hospitality industry. To qualify for these loans, hotel businesses need to meet certain criteria.


  • Firstly, they must be for-profit entities with a tangible net worth under $15 million and an average net income of less than $5 million after taxes over the past two years.


  • These loans offer flexibility in their usage, allowing hoteliers to allocate funds towards various aspects of their business expansion.


  • Whether it's acquiring real estate, constructing new buildings, or procuring crucial equipment like kitchen appliances, laundry facilities, or other essential amenities necessary for enhancing guest experiences, the 504 loans cater to diverse needs within the hospitality sector.


  • Furthermore, the SBA 504 green loan option provides an avenue for hotels to contribute to environmental sustainability. To qualify for this specific program, hotel owners must meet stringent energy efficiency criteria.


This might involve implementing measures to reduce overall energy consumption by at least 10%, transitioning to buildings designed to consume 10% less energy, or integrating alternative energy sources such as wind, solar, or geothermal power into their operations.


By adhering to these energy efficiency guidelines, hotels not only contribute to environmental conservation but also gain access to additional funds within the SBA 504 loan program, extending their financial capacity for sustainable growth.


The SBA 504 loan program thus presents an opportunity for hotel businesses to access tailored financial support, empowering them to expand, renovate, and elevate their services while fostering a commitment to energy efficiency and sustainable practices.


 


Loan Limits, Interest Rates, and Repayment

While the maximum loan amount stands at $5 million, leveraging the SBA 504 Green Program increases this cap significantly. Interest rates, typically set by CDC lenders, range between 2.5% to 3% APR. Repayment terms span up to 25 years, ensuring manageable and accommodating payment structures for hotel owners.


The SBA 504 loan program sets a maximum borrowing limit of $5 million for hotel businesses. However, opting for the SBA 504 Green Program can substantially elevate this cap, offering expanded financial support for hotels seeking greater funding.


Interest rates for SBA 504 loans are primarily determined by CDC (Certified Development Company) lenders. These rates commonly range between 2.5% to 3% APR (Annual Percentage Rate). The actual interest rate a hotelier receives can depend on various factors, including prevailing market conditions, the specific CDC lender, the borrower's creditworthiness, and the loan terms.


For instance, let's consider an example where a hotel business secures an SBA 504 loan of $3 million for a property expansion project. If the interest rate negotiated with the CDC lender is 2.75% APR, the annual interest payment on the loan would amount to $82,500.


Repayment terms for SBA 504 hotel loans are structured to be accommodating and manageable for hotel owners. These terms offer a span of up to 25 years, providing a long-term payment horizon. This extended repayment period allows hotels to manage their cash flow effectively while ensuring that monthly payments remain affordable and sustainable.


Overall, the SBA 504 loan program offers competitive interest rates and extended repayment periods, enabling hotel businesses to access sizable funds for expansion, renovation, or other business initiatives, while also ensuring financial stability and flexibility.


 

GHC Funding simplifies the loan process, offering access to various lenders, matching products to specific needs, and providing multiple quotes for informed decision-making. Take the first step toward expanding your hotel business with a risk-free consultation and a free SBA loan quote.


 

*rates and terms are examples and for demonstration purposes. Actual rates and terms are subject to personal info, credit file and appraisal

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