From well known flag properties to luxury hospitality suites, financing hotel loans is one of our specialties here at Accu-Pro Financial.  Getting a commercial mortgage for a hotel property is very similar to getting a commercial mortgage for an owner occupied commercial property with a few subtle differences.  The driving force for the majority of most hotel income is the RevPar or revenue per available room.

RevPar is most commonly calculated by multiplying a hotels average daily room rate (ADR) by it occupancy rate and is a key indicator of performance.  Rising RevPar is an indication that either occupancy is improving; the ADR is increasing, or a combination of the two.Provided the property is flagged or has verifiable standing in the hospitality industry, we can be your lending source advantage.

Getting a hotel loan for a property is possible provided it meets some of these basic conditions:

* Property is well located
* A profitable operating history
* Strong management
* Flagged Property (must belong to or be sponsored by a national franchise)
* Newer construction (generally 5 yrs. or newer)

Whether you need to refinance an existing hospitality property or you need acquisition financing – we can help you structure the hotel loan that meets your needs.

Things To Know About Financing Your Hotel Property

Getting a commercial loan for your hotel property is a bit different than financing other commercial properties.A hotel property is considered special purpose in nature which simply means that it is generally cost prohibitive to convert it to alternate use.  An office building or retail space can accommodate numerous types of businesses whereas a hotel property can only accommodate a hotel.  Because of this a commercial mortgage for a hotel is going to be considered riskier to the lender than a commercial mortgage for other general purpose property types.  A lender will mediate this risk by taking a more conservative approach to underwriting a hotel property.

The loan to value (LTV) for a hotel property will be lower than other general purpose property types.  For a limited service, flagged property 65% LTV is typical and that number can go down depending upon the age of the property and whether its interior or exterior corridor.  The LTV is simply a ratio calculated by dividing the loan amount by the value of the property.  The debt service coverage ratio (DSCR) for a hotel will also need to be higher than that of a general purpose property type.

The DSCR is a ratio that determines the strength of the property or business income in relation to the proposed mortgage payment.  A typical required DSCR for a hotel property by a commercial lender is 1.30 which simply means that for every $1.00 in proposed mortgage expense there should be $1.30 available to pay it.  For other general purpose property types the DSCR is lower.  A DSCR of 1.20 is common for general purpose property types and can go oven lower for a less risky property such as an apartment building.

Because the acquisition of a hotel property under a conventional program requires a large capital injection, many borrowers prefer to purchase a hotel property by utilizing the SBA 504 program.  This program enables the borrower to put in as little as 15% and still obtain a better interest rate than a traditional commercial mortgage for a hotel.

If you are interested in taking advantage of the SBA 504 program but need some guidance, we can help.  Contact us and we will see how the SBA 504 can be put to work for you.