Compare total financing obligations, not only the interest-rate headline. The OCC’s commercial-real-estate guidance emphasizes property-specific underwriting and notes that hotel lending requires specialist understanding. (occ.gov)
Send lenders the same normalized financials, monthly forecast, capital plan, operating arrangements and borrower information. Ask each to specify:
- Gross commitment and usable closing proceeds.
- Advance conditions and renovation-draw process.
- Interest basis, floor, amortization and maturity.
- Origination, legal, servicing, extension and exit costs.
- Guarantees and other recourse.
- Debt-service coverage and debt-yield definitions.
- Replacement reserves, liquidity requirements and cash-management triggers.
- Appraisal and technical-report commissioning requirements.
- Franchise/operator approvals and reporting requirements.
- Extension conditions and what happens if the hotel is not stabilized at maturity.
Calculate covenant compliance using the lender’s actual definitions. For example, whether a replacement reserve is deducted before calculating coverage can materially change the result; do not compare ratios with different numerators.
Is SBA financing an option?
It may be worth investigating with an experienced lender if the borrower and operating structure qualify. SBA lists most 7(a) loans at a maximum of $5 million and identifies permitted uses including ownership changes, real estate and working capital. Eligibility and structure require transaction-specific confirmation. (legacy.sba.gov)
SBA also announced that, effective July 4, 2026, certain eligible borrowers could combine 7(a) and 504 financing for up to $10 million of SBA-backed funding under the described sequencing. That is not a single $10 million 7(a) loan and should not be treated as automatic financing availability. (legacy.sba.gov)
What if the decision is refinancing rather than acquisition?
Replace purchase uses with the existing loan payoff, prepayment/exit costs, financing fees, required capital and new reserves. Compare usable new proceeds with those uses to establish the equity contribution or genuinely available cash-out.
Stress the refinancing date, not merely the next operating year. A proposed future loan remains an assumption until its underwriting and availability are established.
Gate 10: do not label financing risk resolved until the material conditions, funding gap and closing sequence are understood and accepted.