Since financing in one form or another is an integral part of most transactions, its availability and terms can dramatically affect values. Many sources of financing that had been very active until recently are no longer around. While the pool is rapidly shrinking, there are still some lenders making loans for good quality seasoned assets. There are virtually no loans for new development. Underwriting standards are much more stringent than they had been in the past. This is reflected in higher equity requirements, lower loan to values and more conservative debt coverage ratios. They are looking very closely at both historical and current income trends. Projections are very conservative. Less competition and the fact that hospitality is now considered a riskier class of real estate has resulted in an upward trend in interest rates. Since financing plays such a key role, we are constantly updating our data base of hospitality lenders.
Our Preferred Funding Partner
One key source of financing available today is through the government’s SBA 504 and 7a programs. Recent federal money has improved the SBA and they now offer more simplified applicationsand lower costs structures. Our experienced team has closed many SBA loans in recent years and we can bring the experience and advice needed to walk clients through the process. Loans are available up to90% LTV on deals as large as $10 million.
An exciting new component of the new federal stimulus is the recent SBA announcement of a new energy efficient program that allows hotel owners to qualify for up to $4 million on the SBA portion (previously $2 million) of 504 loans by either reducing energy consumption by 10% or utilizing renewable energy. Fortunately, our professional’s broad hospitality experience can provide clients with the capabilities to effectively achieve this threshold at minimal expense. Our team includes CH-Capital accredited professional's who can assist in these efforts and maximize returns.