Hotel owners need to learn more about how assets are valued in the current marketplace, where increasing occupancy or rate alone does not necessarily translate into a higher property value. Professional hotel brokers and consultants help explain lending parameters such as cap rate and LTV’s (loan-to-value ratios) to owners looking to buy, sell, or refinance. Though the prolonged wait for an economic upturn is beginning to slow things down. Lenders still active in hotel projects often need a second party to absorb some of the risk. This is where the U.S. Small Business Administration’s (SBA) 504 program comes in. The SBA’s 504 loan program is designed to “finance fixed assets for eligible small businesses on reasonable terms.” What does this mean? Essentially, the program provides up to 90% of the financing for eligible projects through a partnership between the SBA, the hotelier, and a traditional lender. The reasonable terms include a low down payment, a fixed interest rate, and a 20-year term for the maturation of the loan. This loan program is meant for small businesses, and many limited-service hotels fit the parameters; owners and investors can use the loans for transactions, new builds, and refinancing. Contact the professionals at www.parkregencycapital.com to find out more information on where you stand.
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