Hospitality Group

Obtaining Hotel Financing: What To Expect - From Michael Bernath


The process of obtaining financing is something that most Hotel AG clients have to deal with, no matter whether they are buying or selling a hotel. For those seasoned in the hospitality industry, this process is very familiar. For those new to the industry, we wanted to answer some of the main questions pertaining to hotel financing. With specialties in finance, market analysis, and investment, Hotel Assets Group's VP/Partner Michael Bernath answers our questions.

What is the typical turnaround time when a hotel deal needs financing?

Turnaround time depends on multiple factors, including the sense of urgency that the borrower and the bank have.  Third Party reports (appraisal, environmental report, property condition assessment, etc.) take time to complete, and if they are not ordered early on in the loan process, they can really affect the closing timeframe.  If you are dealing with a flagged property, the franchise approval process can also be very time consuming.  Because so much value is tied into the flag of a property, most lenders want to make sure that a borrower, and the property for that matter, will qualify for a new franchise agreement.  Additionally, from the SBA side, the closing timeframe is also tied very closely to the type of lender the borrower is using.  If the lender is part of the SBA’s Preferred Lenders Program (PLP), the closing timeframe can be a lot shorter.  The program allows the final credit decision and the subsequent servicing of the loan to be made by the bank making the loan, as opposed to having to send the loan package to the SBA prior to final approval.  This can save significant time with an SBA loan.

Is there anything a hotel buyer can do to get financing faster?

As I mentioned above, a buyer/borrower can expedite the process, to an extent, by having an immediate sense of urgency when it comes to ordering third party reports, getting the franchise approval process started early, etc.  Once the loan package is finished and ready to go to the lender’s credit committee for final approval, the timeframe is really out of the borrower’s hands.  Our goal is to try and get the loan approved within 45 days, though sometimes, specifically with SBA loans, that timeframe can be unrealistic.

If you have any questions about financing a hotel, buying a hotel, or general questions about the hotel market, contact Michael Bernath of Hotel AG at (770) 692-1605 or [email protected].

published: 04-10-2013

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