Financing the Purchase / Conversion of a Hotel
at 85% Loan in Florida
Financing hotels with an SBA 504 loan requires 20% equity injection (downpayment). This is true for both the construction and the acquisitions of hotels. However, if a hotel buyer is expanding an existing business, the SBA requires 15% equity in which case the structure looks as follows:
- Lender: 50% of the total SBA qualified cost
- SBA: 35% of the total SBA qualified cost
- Borrower: 15% of the total SBA qualified cost
Expansion is the key word where various scenarios may be interpreted as expansion. For example, the fact that the buyer was managing the hotel for the seller helped us categorize this purchase as an expansion. In general though the expansion means acquiring a new hotel is the same market and with the same structure of ownership as an existing one. In these cases, the buyers establish a new entity to buy a new hotel but the ownership structure of the new entity is similar to one they hold already in the same market.