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Hotel Financing News

July 2010


SBA fee waiver and 90% loan guarantee – End of the program?
As of the end of May, the Stimulus program for the 90% guarantee on SBA 7a loans ended after being extended 3 times and is now back to 75%. The fee waiver for these loans which is 3% of the guarantee amount is still effective until September of 2010 but contingent upon the Congress approving funds for the program. Bad news is that the Senate has not approved the recent bill which includes the fee waiver funds. At the moment any 7a loan will have the guarantee fee unless the Congress approves the funds and then the funds are disbursed through the 7a loan Queue. It is expected that the Senate will vote again for the bill during the 2nd week of July but whether this bill is approved is in doubt. SBA borrowers should now plan on paying these fees which is calculated as 3% of the guaranteed amount of the loan – Example: Fees on 1000,000 loan is $22,500 (or 3% of the 75% of the loan or 750,000)

The update on the SBA 504 loans
Starting in February of 2009, SBA is still trying to complete the details of the process for what is called the 503 loan pools. With this program introduced as part of the Stimulus bill, the first Trust Deed loans which are traditionally conventional non-guaranteed loans offered by commercial lenders will be guaranteed just like SBA 7a or USDA loans where the lender can sell the guaranteed portion in the secondary market. The hope is that the SBA will complete the detailing of the program within a month or two allowing the secondary market brokers to formulate their processes for buying these loans. The program was to expire at the end of 2010 but SBA appears to work with no deadline in mind. I will update you as soon as these loans become available as many clients are now awaiting the implementation of this program to refinance their existing 504 first trust deed loan to obtain a cash-out for PIP/renovations or to reduce their current rate.

SBA Increase to 5MM
Any House or Senate Bill that included sections on SBA limit increase to 5MM has been stalled in the Congress so far. Senate Bill S.2869 that was expected to pass in January 2010 is probably abandoned and pieces of it is being included in new bills such as HR. 5297. With the elections only months away, it seems improbable that the Congress would be eager to focus on more spending but hopefully this one slides through.

International travel spending in US
The international visitor spending in the US is now at 7% increase over the April 2009 spending, fourth consecutive month of growth. In the following graph (if you are using plain text email, this graph may be an attached image in your email) you see how travel spending by visitors in US was in the negative range all year last year with four months at -21% and in the positive zone every month this year at+8% in March and +7% in April. It may be a contributing factor to an uptick in hotel revenues from last year. An informal inquiry from my clients is showing that the majority of the hoteliers are seeing anywhere from 2% to even 20% increase in revenue this year. Unfortunately, some clients are staying flat or are even seeing declines, a clear indication of peculiar characteristics of their hotel or their local economy.
 
for further questions and discussions, please reach Ramin Mostaan at (949) 477 5000 or ramin@scicap.com




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