Hotel Loans - Hospitality Commercial Mortgages

Hotel Loans, Hospitality Mortgages, Motel Financing

A hotel (hospitality) property is an establishment that provides paid lodging on a short-term basis. The historic provision of basic accommodations consisting of only a room with a bed, a cupboard, a small table, and a washstand has largely been replaced by rooms with modern facilities, including en-suite bathrooms, desks, air conditioning or climate control, and even sometimes kitchenettes. Additional common features found in hotel rooms are a telephone, an alarm clock, a television, and internet connectivity; snack foods and drinks may be supplied in a mini-bar, and coffee makers are sometimes available. Larger hotels may also provide a number of additional guest facilities such as a restaurant, a swimming pool, childcare, as well as conference and social function services. Some hotels offer may even include meals as part of their room packages.

Hotel Loan Rates

Loan Type Min Loan Amount Max LTV Term Length Amortization Rates Learn More
Conventional $1,000,000 75% 3-15 Years 15-30 Years
Conduit / CMBS $2,000,000 75% 5-10 Years 20-30 Years
Insurance $5,000,000 70% 5-30 Years 15-30 Years
USDA $1,000,000 85% 5-15 Years 15-30 Years
SBA $1,000,000 85-90% 10-20 Years 15-30 Years

Types of Hotel Loans

The most commonly used hotel mortgage options are:

Conventional: These are hotel loans that are offered by conventional lenders like banks, savings institutions, or credit unions. Terms typically run from 3 to 10 years with amortizations up to 25 years. This product is best for smaller hotels with qualified borrowers, and it may help to have an existing relationship with the lender.

Conduit/CMBS: These securitized loans are secured by a first-position mortgage on the hotel and are best for hoteliers with large flagged hotels or resorts. They are offered by commercial banks, investment banks, or conduit lenders. A CMBS loan may have an optional interest-only period (if the leverage is low enough), always has a fixed interest rate, and standard amortization periods range from 25 to 30 years. At the end of the term, a balloon payment is due. These loans have much more flexible underwriting guidelines and are great for CRE investors that have trouble meeting liquidity and net worth guidelines that are standard for bank products.

Insurance: These loans are offered by Insurance Companies (usually life companies) and can go up to hundreds of millions of dollars. Because of the stringent underwriting standards and very competitive interest rates that this product has, it is only for well-established, low leveraged hospitality properties in primary markets with loan amounts of $25MM or higher.

USDA: This is the standard product for hotels located in rural areas (with populations of 50,000 or less) through the Business and Industry Guaranteed Loan Program of the US Department of Agriculture. These loans must be in a USDA-designated area, and positively benefit the local community through job creation among other benefits. Interest rates are tied to prime and are generally slightly higher than traditional lender rates.

SBA: These loans are offered by lenders in partnership with the Federal Government’s Small Business Administration, who guarantees a large portion of the mortgage. There are two types of SBA loans—the 7(a) and 504 programs. Interest rates, terms, and amortization schedules can range substantially depending on the program, underwritten cash flow, the flag (if the hotel is under a franchise agreement), the property location, and the lender’s internal guidelines. These loan products can be used for the purchase, renovation, construction, or (in limited circumstances) the refinance of a hospitality property.

Hotel Lending Guidelines

Hotel lending guidelines may differ slightly between different types of loans or even different lenders within the same loan product. However, there are some standard guidelines that are in place for most forms of commercial hotel loans. The Net Operating Income is particularly important in determining the if financing is possible and if so, the total mortgage amount. It is used for the calculation of the DSCR, debt yield, and ultimately the valuation of the property once the appropriate cap rate is applied. Other common metrics reviewed by the lenders include Revenue per Available Room (RevPar), Average Daily Rate (ADR), property occupancy over the last few years, and the total cost basis, including renovations and furniture, fixtures, and equipment (FF&E).


  • Minimum Loan Amount - $2 million
  • Max LTV – 70% (unless mezzanine debt used)
  • Minimum DSCR – 1.5x and above
  • Minimum Debt Yield – 10% and above
  • Term Length – 3-10 years
  • Max Amortization – 30 years


  • Minimum Loan Amount - $1 million
  • Max LTV – 80% (through SBA/USDA); 60-75% (conventional)
  • Minimum DSCR – 1.45x and above (depending on the program)
  • Minimum Debt Yield – N/A
  • Term Length – up to 25 years (SBA); 1-15 years (conventional/USDA)
  • Max Amortization – 15-25 years

Preparing Your Financial Package

There are a few critical items you need to prepare before submitting your request. No matter what type of loan you are planning on pursuing, you should plan on submitting 3 years of operating statements, a personal financial statement, hotel reports, and a hospitality resume. If you need forms to complete your financial package, we provide borrower templates here.

Non-Recourse Mortgages:

  • 3 years operating statements
  • Most recent STR report or (ADR/Occupancy/RevPar Report if not STR is not used)
  • Franchise Agreement and PIP Schedule
  • Cost basis, including renovations, capital expenditures, and FF&E
  • Personal Financial Statement with Schedule of Real Estate Owned
  • Property Website
  • Offering memorandum (if purchase)

Recourse Mortgages:

  • 3 Years Business Tax Returns
  • 3 Years Personal Tax Returns
  • Current Balance Sheet with Debt Schedule
  • Most recent STR report or (ADR/Occupancy/RevPar Report if not STR not used)
  • Personal Financial Statement with Schedule of Real Estate Owned
  • Hospitality Resume for primary sponsors
  • Franchise Agreement and PIP Schedule (if flagged hotel)

Hospitality Mortgage FAQs

Are hotels owner-occupied or investment properties?

Hotels and motels are only considered to be owned-occupied under SBA underwriting guidelines; all other lenders consider hospitality to be an investment property for underwriting and funding purposes.

What are the current interest rates for hotels?

Commercial loan rates for hospitality properties can vary significantly. The commercial rate you obtain will depend on individual underwriting factors such as property characteristics, LTV, Debt Service Coverage Ratio, Debt Yield, property performance, and borrower credit/financial strength. Although an exact loan quote can only be attained after filling out a short informational application and submitting a full financial package, you can find indicative ranges above or on our commercial loan rate page for all loan products including conventional, CMBS, SBA, insurance, and USDA.

Can I refinance my property from a current SBA loan into another SBA loan?

Typically refinancing from one SBA loan into another SBA loan is forbidden under the program guidelines in the majority of cases. However, if you are able to meet specific conditions set forth by the Small Business Administration you may be able to do so.

I’m on a SBA 504 loan and want to refinance. How do I calculate my prepayment penalty?

Your prepayment penalty for refinancing/paying off an SBA 504 loan is determined using a 10-9-8-7-6-5-4-3-2-1% calculation. You multiply the remaining balance of the 504 loan with the interest rate on the bond. After, you multiply that sum with the factor for the applicable year. You can use our handy SBA 504 prepayment calculator to make things easier.

What is the maximum loan to value I can achieve on my hospitality property?

The maximum LTV for your hospitality property ranges from 60 to 80 percent. Conventional loans come in anywhere between 60 and 75 percent, CMBS loans at 70, and your max LTV for an SBA or USDA loan is 80 percent.

What is the difference between a flagged and unflagged hotel?

Flagged hotels have the backing of a franchise group, like Wyndam, Comfort Suites, Motel 6, Holiday Inn, the Hilton, etc. Unflagged hospitality properties are owned and operated independently by the owners and are not under a franchise agreement with a larger company.

What is the maximum SBA guarantee on a hotel?

For SBA 7(a) loans, the maximum guarantee offered by the SBA is 2 million dollars. That number goes up to 5 million for SBA 504 loans. To learn more about the intricacies and details related to SBA loans including underwriting standards and eligible uses, please see our SBA Loan guide.

Was This Page Helpful?