Scicap

Refinancing Hotel SBA 504 Loan for Better Terms in California

Comfort Suites
Salinas, CA

This client had a loan with a higher floor and margin and was in the adjustable period. A low fixed rate for 5 years takes this client to July of 2017 and a margin of 3/4 of percent over prime renders a very reasonable rate in 2017 assuming that the PRIME index will be higher by then than it is currently at 3.25%.

A difficulty in placing this type of loan is that it is not having interested buyers in the secondary market and so most lenders, knowing they have to keep this type of loan on the books, avoid it and gravitate towards SBA 7a.

Another fluid factor in refinancing of 504 loans is that the SBA has to subordinate to the new lender and so a subordination application is placed with the SBA CDC that originally processed the SBA 2nd loan. In states where the SBA has faced many hotel loan defaults and foreclosures, if there is an increase in the loan amount, the SBA may not be willing to offer subordination.

Meanwhile, on SBA 504 loans, the FMLP (where the first mortgage could be sold in the secondary market) and the refiannce program (where a non-SBA loan could be refinanced with a 504 loan) both part of the 2009 Stimulus bill are expiring in September.

Scientific Capital had refinanced this hotel for the previous owner in 2006 and then for the acquisition of it by the new owners in 2008 attesting our client focused rather than transaction focused business model

What Our Client Thinks of Us

Hello Mr. Ramin,
I don’t know how to write but you know how I feel becuse I know if you did not get us a loan in 2008 for the purchase of this hotel, I would never ever would have been a hotel owner and I appreciate this all my life. It is not easy in America to get a hotel loan without credit like us who came from london, not only you got the loan but you worked on so many other obstacles that was not your duty for the loan. With all the issues we had with our partners, if any other lender were working on our loan, he would have given up. Even though we were new in US and not as knowledgable in the financing, you treated us kindly and professionally. Even though we were trying to refinance for a while, you waited and only refinanced us when you knew financing would be beneficial for us. We will always work with you and definitely recommend you to other hoteliers.
Kalpna and Hasmukh Patel
Thank you so much!

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