Avondale Construction Loan

Admin | November 16, 2011 | Comments Off

Avondale Construction Loan

Avondale Construction Loan

In today’s economic environment, lenders are actively using the loan programs from the Small Business Administration (SBA) and U.S. Department of Agriculture (USDA) to provide debt to business owners and developers, especially in the hospitality arena. The good news for hotel owners and operators is that the increased availability of funds through these channels is enabling projects, often in under served communities, to move forward. The bad news is that hotels are still not a preferred asset class among lenders and not all generally advertised SBA or USDA products and terms are available to the lodging sector.

What that means for hoteliers considering government guaranteed loan products is that it is important to understand what it takes to get this type of funding for a hotel today. Generally, most of the characteristics lenders want to see for conventional hotel loans apply to both the SBA and USDA Business & Industry (B&I) programs – well-known flags from such brands as Marriott or Hilton, strong borrower financials, operators with good experience and proven results, the ability for sponsors to pledge additional cash or collateral, high traffic locations off major thoroughfares or interstates, and properties with interior corridors.

SBA Hotel Loan Characteristics

SBA guidelines state that loan amounts for 7a and 504 loans can go up to $5 and $5.5 million respectively, with loan-to-value (LTV) ratios of 90%. But in today’s financial climate, it is hard to secure debt for hotel properties with high leverage and larger loan amounts. On hospitality, some SBA lenders will not lend more than $2 million and want to see LTV’s no higher than 70%.