Review of the Conventional Hotel Loan Program
Rate: 4.0% to 5.5%
Minimum Loan: 1 million
Loan to Value: Up to 65% to 80%
The determination of the Loan to Value is dependent mostly on the hotel and the geographic location. However, strong sponsorship is an additional factor considered by our lenders. It is important to note that some lenders go to 80% to 85% but of the real estate (value that is not including good will and FF&E)
Debt Service Coverage Ratio (DSCR): 1.25
Reserves: None
Amortization: 20 to 25 years
Prepayment: 1 to 5 Years
Points: Generally up to 1 point
Scientific Capital generally tries to get discount on the lender point
Costs: $6.5K to $20K on the average
- Lender processing fee: 0K to 4K
- Appraisal and the review: 4K to 6K
- Environmental Phase I report: 2K (some lenders use prior report)
- Survey: 0 to 3K (Only if a copy is not available- some lenders do not need a survey or their endorsement requirements does not madate a survey by the title company)
- Lender legal fees: 0K to 4K (Some lenders use outside closing attorney)
- Misc such as credit reports, tax services, UCC search, etc.: $500 to 1K
Benefits of Conventional Loans for Financing Hotels
Costs
Processing
program
Partial guarantee
As opposed to SBA or USDA loans, there is no mandate that all partners offer full guarantee. In fact, some lenders may offer guarantee proportional to the ownership percentage. The guarantee can be negotiated with the lender
Drawbacks of Conventional Loans for Financing Hotels
Maturity
Underwriting
Other than the banking or government regulations, there are no standard of requirements for these types of loans and so there is a wide range of requirements from one lender to another and from one market to another