For the last 12 months, the hotel financing market has been on a run with competition among lenders that has not been seen since prior to the financial crisis. Lenders are also starting to focus increasingly more on areas outside of leverage and pricing in order to keep mortgage leverage below the 70 percent loan-to-value level and preserve loan profitability. What this means for borrowers is that lenders are more willing than ever to listen to your story and hopefully, to win your business.
Historically Low Interest Rates
A large percentage of borrowers have taken advantage of the market’s historically low interest rates, whether that’s to secure financing for a renovation or acquisition or to refinance existing debt.
Bigger Pool of Lenders Available
An increase in lenders in recent years as led to an uptick in competition and in order to deploy capital, they have been more willing to provide aggressive loans on hotels, which includes lending in secondary and tertiary markets.
Lending Programs by the SBA Available for Hotels
There are two kinds of SBA loans available. The first is called the 7a program for financing $3 million or less. The second is called the 504 program for purchases made between $1 million to $6 million. Each has its particular strengths and requirements. Though a bank lender doesn’t have to participate in an SBA program, the majority do.
Excellent Time to Look Into a Conventional Loan Program
Many hotel financing lenders are now offering up to 55 percent “cash out” Loan-to Value and 65 percent Loan-to-Value on hotels. Rates are currently highly competitive with relatively low fees.
Many Borrowers Turning to Conversions
Many hotel investors are choosing to vet redevelopments, conversions and repositioning opportunities. While there is financing available to construct new properties, ground-up sites can still be challenging to find. To add further, in a number of markets, the price of land is not only high but steadily rising. As such, this is one of the biggest reasons hotel loan borrowers are opting to convert their properties.
Currently a Favorable Environment for Investors Seeking Projects
Due to the recent upturn in the economy, many lenders are approving well-conceived hotel development projects as well as acquisition opportunities that are in a good location.
Lenders Have Been Loosening Restrictions as of Late
If you’re a hotel borrower, before interest rates spike again, industry forecasters suggest that now could be a good time to refinance.
To get more information about hotel financing, visit an online hotel law information website. Due to the variety of loans available in today’s market, you may qualify for a better loan deal than you think