HOTEL TYPES
What Type of Hotel Are You Financing?
Hospitality is a specialized CRE asset class. Lender appetite depends on flag affiliation, market position, and operating performance.
Limited-Service / Select-Service
Flagged brandsHampton Inn, Fairfield, Holiday Inn Express. No full restaurant or banquet. Lower operating costs than full-service hotels. Franchise flag provides brand, reservation system, and loyalty program.
Extended-Stay
Longer stays, apartment-like unitsResidence Inn, Home2 Suites, WoodSpring. Kitchen-equipped rooms for weekly and monthly guests. Longer stays can mean lower turnover costs.
Boutique / Independent
Unique properties, higher scrutinyNon-flagged, design-forward properties. Higher ADR potential but no brand reservation system. Lenders require stronger operating history and higher down payment. Management track record is critical.
FINANCING OPTIONS
Loan Options for Hotel Properties
Hotel lending is more specialized than other CRE. Flag affiliation and operating history significantly affect available options.
SBA 504
Owner-operated hotels, 15% downIdeal for owner-operators buying a flagged hotel. PIP (Property Improvement Plan) costs can be included. Lenders expect hospitality management experience.
Conventional Bank
Established operators, flagged hotelsBanks require strong operator experience, flagged brand, and 2+ years of STR (Smith Travel Research) performance data. Higher down payment than other CRE.
CMBS / Conduit
Stabilized flagged hotels, non-recourseNon-recourse for stabilized, flagged hotels with proven RevPAR. Yield maintenance prepayment. Ideal for portfolio hotel investors.
Bridge / Repositioning
PIP, renovation, flag conversionShort-term financing for hotel renovations, brand conversions (flag changes), and PIP compliance. Takeout into permanent financing once stabilized.
Typical ranges, updated September 2026. Your terms depend on the property, the borrower and the lender.
KEY METRICS
What Lenders Evaluate for Hotel Loans
WORKED EXAMPLE
Example: From RevPAR to Loan Size
Hotel lenders work from the hotel’s operating numbers, not leases: rooms × ADR × occupancy gives room revenue, expenses come off to reach net operating income, and the loan is the lower of the LTV cap and what NOI covers at the lender’s minimum DSCR. Assumptions for illustration only: an 80-room select-service hotel valued at $12,000,000, $140 ADR, other revenue of 5% of room revenue, NOI of 32% of total revenue after the management fee and FF&E reserve, a 7.5% rate on a 25-year amortization, a 1.30x minimum DSCR and a 65% LTV cap — computed with our max loan calculator.
| 70% occupancy | 60% occupancy | |
|---|---|---|
| RevPAR ($140 × occupancy) | $98 | $84 |
| Room revenue (80 rooms × RevPAR × 365) | $2,861,600 | $2,452,800 |
| Net operating income | $961,498 | $824,141 |
| Largest loan | $7,800,000 (65% LTV binds) | $7,148,000 (1.30x DSCR binds) |
| Cash down on $12,000,000 | $4,200,000 | $4,852,000 |
Ten points of occupancy cost $652,000 of loan in this example. That is why lenders read the trailing 12 months and the STR comp set closely, use the weaker seasonal months, and why a hotel with a pending PIP is often financed with a bridge loan first.
Typical ranges, updated September 2026. Your terms depend on the property, the borrower and the lender.
THE PROCESS
How Hotel Financing Works
Share Your Deal
Property details, room count, flag affiliation, STR data (RevPAR, ADR, occupancy), PIP requirements, and purchase price or estimated value.
Submit to BestLoanUSA
Single application. Include your hospitality management experience and operating history. No hard credit pull.
Advisor Review
Dedicated advisor evaluates your hotel’s flag status, market position, STR performance, and PIP timeline to recommend SBA, conventional, CMBS, or bridge financing.
Lender Matching
We submit to hospitality-specialist lenders. Flagged hotels usually have more lender options. You compare the term sheets lenders return.
Underwriting & Appraisal
Hospitality-specific appraisal with income approach, STR comp analysis, and PIP cost review. Provide trailing 12-month P&L, franchise agreement, and management contracts.
Close & Operate
SBA 7(a): 30–60 days. SBA 504: 60–90 days. Conventional: 30–45 days. CMBS: 45–90 days. Bridge: 14–30 days. Hospitality appraisals and franchise approvals can add time. FF&E reserves typically required post-close.
Free tools
Run the numbers
The same metrics a lender checks — free, instant, no signup. Each result links straight into an application.
- DSCR Calculator Calculate your Debt Service Coverage Ratio instantly. See if your property qualifies for CRE financing and which loan programs are available to you.
- Break-Even Occupancy Calculator Calculate the minimum occupancy rate your property needs to cover all expenses and debt service. Measure your vacancy cushion and downside risk.
- Commercial Mortgage Calculator Estimate your monthly CRE loan payment, total interest cost, and full amortization schedule. Compare loan structures before you apply.
FAQ
Frequently Asked Questions
Why is hotel financing more difficult than other CRE?
Hotels are operating businesses, not just real estate. Revenue fluctuates with occupancy, seasonality, and economic cycles. There are no long-term leases guaranteeing income. Lenders require higher down payments, stronger DSCR (1.30x+), and proven management experience to mitigate this risk.
Does having a franchise flag help with financing?
Usually. Flagged hotels (Marriott, Hilton, IHG, Wyndham, Choice, Best Western) generally have more lender options and better terms than independent properties. The flag provides a national reservation system, loyalty program, brand recognition, and quality standards that reduce risk for lenders. Some lenders won’t finance independent hotels at all.
What is a PIP and how does it affect financing?
A Property Improvement Plan (PIP) is the franchise brand’s required renovation scope to bring a hotel up to current brand standards. PIP costs vary widely with the brand and the hotel’s age and condition. Lenders factor PIP cost into the total project. SBA 504 can include PIP in the loan. Bridge loans are common for PIP execution before permanent financing.
Can I buy a hotel with SBA financing?
Yes. SBA 504 is available for owner-operated hotels with as little as 15% down (hotels are special-purpose property under SBA rules; 20% if the business is under two years old). You must actively manage the property (not passive investment). Lenders look most favorably on flagged hotels with an experienced operator. PIP and FF&E costs can be included in the total project.
What is an FF&E reserve?
FF&E (Furniture, Fixtures, and Equipment) reserve is money set aside annually for ongoing replacement of hotel room furnishings, lobby furniture, and equipment. Lenders and franchise agreements typically require a set percentage of gross revenue to be deposited into an FF&E reserve account; the percentage is written into the loan documents or franchise agreement.
What STR data do lenders require?
Smith Travel Research (STR) reports showing your hotel’s RevPAR, ADR, and occupancy compared to a competitive set. Lenders want to see trailing 12-month performance at or above the comp set average. STR data is the industry standard for hotel performance benchmarking and is requested by most hotel lenders.
How much can I borrow to buy a hotel?
The lower of the lender’s loan-to-value cap — often 55–70% for bank and CMBS loans, up to 85% with SBA 504 for an owner-operator — and the loan the hotel’s net operating income covers at a minimum DSCR, often 1.30x or more. In our example, an 80-room hotel at $140 ADR supports $7,800,000 at 70% occupancy but $7,148,000 at 60%.
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Guides & articles
All articles →- The 2026 CRE Maturity Wall: Refinancing a Loan That Comes Due $875 billion of commercial mortgages are scheduled to mature in 2026. How to size the gap when a low-rate loan refinances at today’s rates, and how to close it. RefinancingHotels
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Glossary
All terms →More calculators
All calculators →- Debt Yield Calculator Calculate Debt Yield (NOI ÷ Loan Amount) — the metric CMBS and institutional lenders prioritize over DSCR and LTV. Find your maximum loan amount based on target debt yield. CMBSNOI
- Defeasance Calculator Estimate the total cost of defeasing your CMBS or conduit commercial loan. See the Treasury portfolio cost, transaction fees, and how it compares to yield maintenance. CMBSPrepayment penalty
- NOI Calculator Calculate your property's Net Operating Income with a detailed income and expense breakdown. NOI drives your DSCR, cap rate, and property valuation. NOIDSCR