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Obtaining Motel Loans

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Motels, like any other business, need additional capital or funding to stay in business. Motel owners can either apply for a cash advance or loans from financial institutions. However, obtaining funding for a motel loan can be quite a challenge for a couple of reasons. We often find motels in small towns or in areas that are not suitable locations for big and flagged hotels. Most of the time, lenders are on the lookout for the location of motels as this tells a lot on the capability of a motel owner to pay for his loan.

Another factor that lenders consider is the overall design and look of the hotel. The appearance of a lot of exterior corridors in motels degrades as time passes. Unattractive features repel not only potential customers, but lenders as well.

However, this does not mean that motel owners are short of options when it comes to funding motel loans. The SBA offers a lot of loan programs to assist small businesses, like motels, in their financial needs. It is important to note though that the SBA is mainly a guarantor and does not make direct loans to small businesses. They work with numerous lenders and liaisons from whom motel owners can get funding from and SBA guarantees lenders that they will be repaid.

Normally, motel owners look at SBA options as the best means to finance their business. SBA loan programs generally offer the highest level of financing for motels. Motel owners can ask for up to 85% financing on purchases, refinances, and total project costs. SBA loan programs also have fixed rates, ranging from five to ten years.

Motel owners can also seek financing help from CMBS or Commercial Mortgage Backed Securities lenders. CMBS lenders are those lenders who pool loans and then sell these loans to the commercial mortgage secondary market. This type of lenders usually offers 85% financing, much like the SBA. However, they offer longer loan terms, wherein payment can be done in 30 years with fixed rates. They also give motel owners stated income programs.

Banks also offer funding for motel loans. Considered as the most conventional way to obtain financing aid, conventional loan programs from banks typically do not go beyond 65% of the loan value on purchases, and rarely exceeds 55% on refinances. When applying for cash out refinances, motel owners subject themselves to more checks and scrutiny. Banks usually would want to see proceeds of the loan used in renovating or improving the motel. Amortization schedules offered by banks for motel loans are normally from five to twenty years.
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