SBA 504 Hotel Loans

Hotel Financing Direct offers SBA 504 hotel loans. Please note that the House and Senate are making some improvements to the SBA 504 hotel loan program as part of the new economic stimulus package. We will be adding these modifications to the 504 loan program as they become available.

Learn about the SBA 504 loan program changes - part of the new economic stimulus package.

SBA 504 Hotel Loan Program - FAQS

  • SBA 504 hotel commercial loans for healthy expanding businesses.
  • SBA 504 hotel loan fixed rate below market financing.
  • SBA 504 hotel financing for fixed assets: real estate, machinery and equipment.
  • SBA 504 hotel loan term of 20 years for real estate, 10 years for machinery and equipment.
What are the Advantages of the 504 Hotel Loan?
  • SBA 504 hotel loans offer - Long term below market fixed rate financing.
  • SBA 504 hotel loans offer - Down payment requirement of only 10% or more for customer.
  • SBA 504 hotel loans offer - Lender/Bank can provide 90% financing for customer.
  • SBA 504 hotel loans offer - Lender/Bank can participate in larger transactions.
  • SBA 504 hotel loans offer - Lender/Bank enjoys first lien, lending 50% of value at market rate and fees.
Who are Eligible for SBA 504 hotel loans?
  • For profit businesses.
  • Tangible net worth not to exceed $8.5 million.
  • Net profit after taxes not to exceed $3 million during previous 2 years.
What is Eligible Use of Funds?
  • Purchase land, purchase or construct building.
  • Modernize, renovate or improve building.
  • Purchase machinery and equipment with 10 year useful life.
  • Soft costs and/or closing costs.
  • Total project size $125,000 minimum.
  • No maximum total project size.
Who are Ineligible Borrowers?
  • Non-profits.
  • Speculative development.
  • Lending institutions, insurance companies.
  • Gambling concerns and private clubs.
What is Ineligible Use of Funds?
  • Refinancing.
  • Working capital.
  • Inventory.
  • Rolling stock.
What is the SBA 504 Hotel Loan Product?
Rate: 5 or 10 year treasury bond rate plus approximately 210 basis points. Structure: Healthy Expanding Business
  • 50% Lender/Bank in 1st Lien
  • 40% 504 in 2nd Lien
  • 10% Equity
Start-up Businesses
  • Start-up or Special Purpose Building will require 15% equity.
  • Start-up and Special Purpose Building will require 20% equity.
What is the Private Lender Participation?
  • Minimum 10 year term on real estate, minimum 7 year term on machinery and equipment.
  • Market rat and fees.
  • Covenants established by lender.
  • One time 1/2% fee to SBA on Lender's participation.
What are the Fees for the Small Business Owner?
  • Debenture Fees: 2.65% of 504 loan.
  • All of the fees can be financed.
Are there Other Requirements?
  • Personal guarantee by 20% or greater owner.

504 Loans new changes - Part of the new economic stimulus package

  • CHANGE 1 - The ½% fee that a bank participating in the 504 loan program has to pay to SBA will be waived. This will be effective until September 30, 2010.
  • CHANGE 2 - 1 ½% of the roughly 2 ¼% fees associated with the 504 loan will be waived. Normally in a $1,000,000 project when the 504 portion is $400,000, the actual loan amount is $409,000 (IE: $9,000 in fees are financed into the loan). As a result of this change the fees will be reduced by $6,000 and the borrowers Note amount will now only be $403,000. It effectively reduces the fees financed into a SBA 504 loan to 1/3 of the amount they previously were. This change will remain in effect until September 30, 2010, or until the money appropriated to waive these fees has been exhausted.
  • CHANGE 3 - Refinances under 504 were previously ineligible. That has been amended to allow up to 50% of the project cost to be a refinance so long as:
  • (A) The new loan involves business expansion.
  • (B) It is collateralized by fixed asset s.
  • (C) Existing debt incurred for benefit of small business.
  • (D) Proceeds used to acquire land, to construct or expand building or to purchase equipment.
  • (E) Borrower is current on all payments of existing debt for 1 year.
  • (F) New financing will provide better terms or interest rate.
  • (G) New financing will be used only for refinancing existing debt, or for costs related to project being financed. This change is a permanent change and will not expire.
  • CHANGE 4 - To create liquidity and allow banks to lend, the SBA will guaranty up to $3 billion for 504 first mortgage pools to be sold.

No upfront costs or obligations.