Hotel & Commercial

What are hotel loans?

Types of hotel loans

There are several types of loans available to hotel owners and investors, each suited to specific needs:

1. 01
   Conventional hotel loans

   Traditional loans from banks or credit unions for hotel purchases, construction, or refinancing. Typically require a strong credit history, stable income from the hotel, and 20–30% down. Terms usually 5–25 years.

2. 02
   SBA 7(a) loans

   Government-backed loans that help small business owners — including hospitality — purchase or renovate a hotel. Typically lower rates and longer repayment terms (up to 25 years). Loan amounts up to $5 million.

3. 03
   Hotel bridge loans

   Short-term financing during a transition — e.g., purchasing a hotel before securing permanent financing or refinancing an existing loan. Higher rates due to the short term. Usually 6–12 months.

4. 04
   Hotel construction loans

   Financing for new construction — labor, materials, and other build costs. Typically disbursed in stages; short-term, often refinanced or converted into a standard mortgage once the hotel is operational.

5. 05
   Hotel renovation loans

   Designed to fund upgrades to an existing hotel — guest rooms, amenities, lobby, or new features like a pool or fitness center. Loan amounts vary by scope; terms typically 5–20 years.

6. 06
   CMBS loans (Commercial Mortgage-Backed Securities)

   Backed by a pool of commercial properties and structured as bonds sold to investors. Typically used by larger hotels or hotel chains for purchase or refinance. Higher loan amounts; terms 5–10 years.

How to qualify

Qualifying for a hotel loan typically requires meeting certain financial and business criteria. Lenders evaluate the following:

1. 01
   Credit score

   Lenders typically require a solid credit score (often 650+). A higher score improves approval odds and rates.

2. 02
   Debt-to-income ratio

   Lenders assess your DTI to confirm you can manage repayment. The lower your debt relative to income, the stronger the file.

3. 03
   Hotel performance & financials

   Operating income, profit margins, occupancy rates, and historical revenue. A strong track record is crucial.

4. 04
   Down payment

   Typically 20–30% of the hotel's purchase price.

5. 05
   Property appraisal

   An appraisal determines current market value and confirms the property has enough value to serve as collateral.

6. 06
   Business plan

   Especially for purchases or new construction, lenders may require a solid plan outlining how you'll operate and grow the hotel — demonstrating your ability to manage the property and generate revenue.

Benefits of hotel loans

• Access to capital — funds to purchase, build, or upgrade hotels and grow the business.
• Long-term financing options — manageable monthly payments and flexibility.
• Tax benefits — interest payments may be tax-deductible, lowering your overall tax burden.
• Improved cash flow — financing renovations can drive higher room rates and occupancy.

Risks to consider

• Interest costs — higher rates on short-term loans or less favorable terms can raise the overall cost of financing.
• Market conditions — hospitality is sensitive to economic and travel cycles, which affect revenue and repayment.
• Property depreciation — hotels can lose value over time without maintenance, affecting refinance or sale.

Beyond hotels: the full commercial loan landscape

Commercial real-estate (CRE) loans

Owner-occupied CRE

The business occupies ≥51% of the property.

Investment property loans

Office, retail, multifamily, and industrial.

Construction loans

Ground-up or major rehab.

Bridge loans

Short-term (6–36 months), fast execution.

Permanent / term loans

Long-term stabilized financing.

SBA loans

SBA 7(a)

Working capital, real estate, and business acquisition — government-backed with favorable terms.

SBA 504

Fixed assets and owner-occupied real estate.

SBA Express

Faster approval, smaller loan amounts.

Construction & development loans

Ground-up construction

Build from zero — milestone-based draws as the project advances.

Renovation / value-add loans

Capital to upgrade an existing asset and lift its income.

Mezzanine financing

Gap capital that sits between the senior loan and equity.

Specialty commercial loans

For unique property types or situations:

• Hotel & hospitality loans
• Self-storage loans
• Healthcare / assisted-living loans
• Mixed-use property loans
• Franchise financing

Capital market & institutional loans

Larger transactions and more sophisticated structures:

• CMBS loans
• Life insurance company loans
• Agency loans (Fannie Mae / Freddie Mac — multifamily)
• Private equity / debt funds

Short-term / alternative financing

Speed over cost, flexible underwriting:

• Hard money loans
• Private money loans