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BUILDING A HOTEL
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HOTEL CONSTRUCTION LOANS

When you are considering a construction loan for a hotel it is important to plan ahead. Every construction loan has built into it the necessity to refinance at some time in the future. The construction period for a hotel is approximately one year. That is measured from the first funding thru a certificate of occupancy. The day that you receive a C of O you have the maximum debt outstanding, almost full operating expenses and zero income. You have to plan for what happens from that time forward.

CONVENTIONAL BANK LOANS

Bank construction loans are usually 60% to 65% of project cost. When we structure a bank construction loan we do a combination loan consisting of a construction period, nominally 12 to 18 months, and then a role over into a mini-permanent for up to three years. The reason for this is to provide two years of operating history after startup. This gives us the basis to refinance into a regular first mortgage. It is important to have sufficient funds in the soft costs portion of the budget to cover startup. It is also important for the sponsor to have sufficient liquidity. Total loan term is around four years.

SBA 504 LOANS

At 80% of project cost, this is a good program and we try to use it frequently. It is a combination of a 50% bank first mortgage and a 30% second mortgage guaranteed by SBA. The bank acts as the construction lender and as a bridge lender for the SBA portion. At C of O the SBA portion funds and the bank bridge is paid off.

In effect this is a 25 year self amortizing loan. The trick is to find a first position lender who will do a fixed rate loan for the first 5 to 10 years. Some try to limit the fixed term or to tie it to prime and that can be expensive. The SBA second is fixed for its 25 year term.

BRIDGE AND PRIVATE LENDERS

We try to avoid these loans for construction. They tend to be short term and have high interest rates. They can put a borrower in the position of having a maturing construction loan while the property is not yet seasoned sufficiently to get a permanent.

OUR ADVICE

Use caution and plan ahead. Consult us before you make any commitment.

SEE OUR OTHER HOTEL PAGES:
HOTEL REFINANCING LOANS
HOTEL PURCHASE LOANS
SBA HOTEL LOANS

THE BEST LOAN FOR YOU

Hotel financing is our specialty. We arrange loans for all kinds of hotels in all parts of the country. Large and small, franchised and independent. We have years of experience and can handle any need that our client may have.

We are independent and we do not have a requirement to fit you into any particular kind of loan as most others do. We always represent the owner / borrower. We strive to get our client the best loan that fits their needs.

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MINIMUM LOAN SIZE IS $1 MILLION

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8204 East Del Caverna Drive, Scottsdale, AZ. 85258
info@fcfcorporation.com
AZ CMB-0922527
NMLS ID 181100
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