Hotel SBA 504 Loan
Review of the SBA 504 hotel loan program
The 2nd loan is fully amortized which means it is amortized for 20 and matures in 20 years
The commercial loan can be amortized at 15, 20, 25, or 30 but cannot mature in less than 10 years.
- Appraisal: About $5K
- Phase I: About 2K
- Lender processing: About 4K
There may be additional charges such as survey, if one is needed and the owner or the seller does not have a copy, lender legal fees, if our lender uses external attorneys to close its loans. We generally try to avoid lending sources that use outside closing attorneys
Benefits of the 504 loans for hotels
Drawbacks of the SBA 504 loans
SBA loan proceeds can only be used for the borrowing business. The borrowers cannot cash-out from the hotel’s equity for cases such as:
- Buy out other partners(This is allowed for SBA 7(a) loans)
- Inject equity in other investments
- Pull cash out and hold
- Payoff debts not incurred by the hotel
- Pay off personal debts that are not incurred by the hotel – HELOCs and personal credit cards if used specifically for the business with proof of the use of funds maybe refinanced by 7a loan
However hotel may be refinanced to include PIPs (Property Improvement Plans), renovations, remodeling, acquisitions of FF&E, pay off and consolidate multiple loans including lease loans, credit cards, lines of credits, and others, and other business related liabilities and expenses