Hospitality is one of the biggest arenas in SBA lending — hotels and motels are operating businesses tied to real estate, and the 7(a) and 504 programs finance them heavily. Because the owner runs the property as a business, these deals satisfy SBA owner-occupancy, and a single loan can wrap the real estate, the going-concern business, FF&E, a franchise renovation, and working capital. Jaken Finance Group helps you get matched to hotel SBA financing and can bridge an acquisition when the deal can’t wait. Request commercial financing or call (833) 264-7776.
Why SBA fits hotels
A hotel is real estate plus an operating business plus a lot of FF&E, which maps cleanly onto SBA:
- SBA 7(a) — the common route for acquiring a hotel as a going concern: it can finance the business and goodwill, the real estate, FF&E, the PIP, and working capital in one loan up to $5M.
- SBA 504 — used when the deal is primarily real estate and fixed assets and the borrower wants a long-term fixed rate with about 10% down.
RevPAR is the language of hotel underwriting
Hotel lenders speak in three metrics, and you should present your deal in them:
- Occupancy — the share of rooms filled
- ADR (average daily rate) — the average price per occupied room
- RevPAR (revenue per available room) — occupancy × ADR, the single number that captures performance
Underwriters study RevPAR trend against the local competitive set (the “comp set”) to judge whether a property is gaining or losing share. A hotel with stable or rising RevPAR is a far stronger file than one bleeding share to newer competitors, even at similar revenue.
Flags and the PIP
Whether a hotel is branded (flagged) or independent changes everything. A flag brings reservation systems, loyalty demand, and standards — but also a Property Improvement Plan (PIP): the renovation the franchisor requires to meet brand standard, frequently triggered at acquisition or franchise renewal. The SBA loan must be sized to include the PIP, so an accurate scope and cost estimate is essential. Underestimate the PIP and the deal is under-funded; document it well and the financing is far smoother. Independent hotels avoid the PIP but must prove demand without a flag’s booking power.
Down payment, terms, and what raises the bar
Expect roughly 10%–20% down. Hospitality’s revenue volatility and special-use nature lead lenders to want more equity than a standard building — with the higher end for independents, first-time hoteliers, or big-PIP deals. Real estate amortizes toward 25 years; 7(a) pricing floats with prime (about 6.75% in Q3 2026) plus a capped markup. Operator experience carries real weight in this category. Confirm current terms at application.
A hotel SBA example
A buyer acquires a flagged limited-service hotel for $4.5M with a franchisor-required $700K PIP — new soft goods, lobby refresh, and exterior work due within the first year. The SBA 7(a) must be sized to include the PIP, so the financed amount reflects both the purchase and the renovation, with the buyer bringing roughly 15%–20% equity given hospitality’s risk profile. The file’s strength rests on RevPAR trend: the hotel has held its share against the local comp set for three years, and the flag’s reservation system supports stable occupancy. Now compare an independent motel at half the price — no PIP, but also no flag to drive bookings, so the underwriting leans entirely on the operator’s ability to fill rooms without brand demand. Both can be financed, but they’re different risk stories: the flagged deal trades a mandatory PIP for booking power and standards, while the independent trades renovation freedom for the burden of generating its own demand. Model the PIP accurately and present a clear RevPAR history, and a hospitality file becomes far more financeable than its reputation suggests.
When a hotel deal can’t wait
Hotel transactions move on the seller’s timeline, not the SBA’s 45–90+ day calendar, and a franchise PIP clock can add pressure. Jaken Finance Group can bridge the acquisition now, closing in days, and let the SBA loan take out the bridge once underwriting and the PIP scope are finalized — the bridge now, SBA later approach. For fast bridge and value-add hospitality scenarios, see our hotel & motel bridge financing.
The metrics behind a hotel deal
Hotel lenders benchmark a property against its STR report (or equivalent), which shows occupancy, ADR, and RevPAR relative to a defined competitive set — and, crucially, the property’s index: whether it captures more or less than its fair share of the market. A RevPAR index above 100 means the hotel outperforms its comp set; below 100 signals share loss that underwriting will probe hard. Acquisition prices are frequently expressed as a cost per key (price per room), which lets buyers and lenders compare deals across property sizes and against replacement cost. And for a flagged hotel, the PIP cost per room is a line every lender scrutinizes, since it must be financed alongside the purchase. Present a hotel deal with a clear STR history, a defensible cost per key, and a fully-scoped PIP, and a category with a risky reputation becomes financeable — the data does the persuading far more than optimism about the market.
What 7(a) and 504 will fund on a hotel
A hotel file is a building, a business, and a pile of short-lived furnishings. The 7(a) program can acquire, refinance, or improve real estate and buildings. It can also fund working capital, equipment, furniture and fixtures, and a full or partial change of ownership. The maximum 7(a) loan is $5 million.
Read the 504 page in two places. The headline says fixed-rate financing of up to $5 million. The program section on that same page says the maximum 504 loan is $5.5 million. Test the debenture against $5.5 million. Do not let the headline erase the program text.
A 504 loan can buy, build, or renovate buildings or land. Equipment is eligible only with at least 10 years of useful life left. Working capital and inventory are out. Speculation and investment in rental real estate are out. Opening cash for a hotel, and a passive hold of the inn, do not ride entirely on a 504.
The lender comparison sets 7(a) maturity. Most 7(a) loans are 10 years or less. Real estate, or equipment with a useful life over 10 years, can run longer. Real estate can reach 25 years, including extensions. The building is the long piece. Soft goods are not.
Standard 7(a) once the loan clears $350,000
Most hotel purchases are above $350,000. On the lender comparison, standard 7(a) loans run from $350,001 to $5 million. They exclude 7(a) Small, SBA Express, and pilot lines. The maximum SBA guaranty in that band is 75%. SBA lists a turnaround of 5 to 10 business days. That is the guaranty review. It is not the calendar for a survey, a brand consent, and a PIP bid.
SBA Form 1919 is required on those loans. A revolving line is not part of standard 7(a). Revolvers sit under SBA Express, Export Express, or CAPLines. If the hotel needs an operating line, ask for it as its own facility.
A smaller FF&E or conversion loan at or under $350,000 can be 7(a) Small. The guaranty is 85% at $150,000 or less, and 75% above that, up to the $350,000 cap. SBA lists a 2 to 10 business day turnaround for that smaller band. For loans of $50,000 or less, SBA does not require collateral, except International Trade loans. From $50,001 up, the lender uses its own comparable collateral policy. The loan is not to be declined only because collateral is thin. A hotel deed usually solves that question anyway.
Illustration: a 72-room purchase inside the 7(a) cap
Illustration only. A buyer contracts a 72-room limited-service hotel for $2,880,000. The brand PIP is $360,000. Replacement FF&E is $72,000. Opening cash is $120,000.
Uses total $3,432,000. Assume a 15% equity injection, which is $514,800. The financed balance is $2,917,200. That balance is under the $5 million 7(a) maximum.
Contract price per room is $40,000 ($2,880,000 / 72). PIP per room is $5,000 ($360,000 / 72). Those ratios are arithmetic on this illustration. They are not a market survey.
The $120,000 of opening cash cannot sit on a 504, because working capital is ineligible. Real estate, PIP, and the FF&E package total $3,312,000. That subtotal is under both the $5 million headline and the $5.5 million program maximum. The cash still needs a 7(a), owner funds, or a microloan if the cash need is small enough to fit that program.
Bridge interest while brand consent is open
Sellers and PIP deadlines rarely wait for a full SBA file. Jaken Finance Group bridge pricing on this kind of business-purpose closing is 8.99%–13.5%, with a target of 7–10 business days. That range is the bridge. It is not an SBA note rate.
Illustration. A $1,200,000 interest-only bridge at 8.99% costs $107,880 a year, or $8,990 a month. The same balance at 13.5% costs $162,000 a year, or $13,500 a month. Four months of interest is $35,960 at 8.99%, or $54,000 at 13.5%. The SBA loan is the planned takeout. The bridge is what keeps the contract alive. See bridge loans for the product, separate from the hotel SBA file.
Holding company, operating company, and a passive buyer
Some buyers park the hotel in a holding company and run it in an operating company. 13 CFR 120.111 allows an Eligible Passive Company to use proceeds to acquire or improve property it leases to an operating company. The lease must be in writing and subordinate to the SBA lien. Counting renewal options that only the operating company can exercise, the remaining term must be at least as long as the loan. A five-year operating lease fails a long real-estate maturity. Rent cannot exceed the loan payment plus the holding company’s direct costs, such as taxes, insurance, and maintenance. The holding company must assign the rents. Owners of 20% or more of either company must guarantee the loan.
A buyer who will not operate the hotel, and who will not use that structure, hits a different rule. 13 CFR 120.110(c) treats passive landlord businesses as ineligible, aside from the Eligible Passive Company exception. That buyer is in DSCR rental territory. DSCR pricing is 5.75%–10.5%, and those loans close in about 14 business days. Do not use the 7–10 day bridge clock for a DSCR rental close.
If the hotel is flagged, lenders check the SBA Franchise Directory. The file effective September 29, 2026 is a list for eligibility review. SBA says a listing is not an endorsement of the brand and does not mean the hotel will succeed.
Hotel documents that change the loan amount
Bring a trailing comp-set report, a trailing-twelve profit and loss, and the PIP in the franchisor’s form. Add the purchase contract, a room-count occupancy export, insurance quotes, and a sources-and-uses that splits real estate, PIP, FF&E, and cash. If the brand requires an addendum, ask for it before the lender’s screen, not after. A missing PIP dollar is the usual reason a hotel commitment comes up short.
Get matched for a hotel SBA loan
Buying, refinancing, or repositioning a hotel or motel? We’ll help you pursue the right SBA structure — PIP included — and bridge it if the deal is time-sensitive. Request commercial financing or call (833) 264-7776.
Program details: SBA — loan programs. Rates and rules change; verify current terms at application. Jaken Finance Group helps hoteliers get matched to SBA financing and can bridge time-sensitive hospitality deals.