Category Archives: Hospitality

Business Evaluation: Call Us BEFORE You Bid

Why are we offering you a free business evaluation? Many clients are looking right now for the next project. Are you one of these people?

If so, we love to hear from clients who are ready to take on new challenges. These might include expanding current businesses or adding new projects to portfolios. However, we find we can be even more helpful to clients when they contact us even before bidding on a business or property.

Before You Make an Offer:

• Business Evaluation of the subject property: We can help evaluate the business. We examine the documents you have or with your permission, we can also contact the current owners. Then we begin to determine the business’ strengths and weaknesses. We provide an independent opinion on reasonable projections for expenses and revenues as well as advice on possible challenges.

• Understanding You as a Borrower: Our clients’ comfort and trust in our process is critical. In order to foster the very best relationships, we spend a lot of time getting to know our clients. We want to understand your business goals as well any concerns you might have. As a result, we will then know what your priorities are in terms of financing and finding the best loan products for you.

• Considering Hidden Costs You Might Not Have Considered:  We have the benefit of closing hundreds of loans. Therefore, we have experienced potential hiccups and can pass on that wisdom to you. We can offer information about whether a survey will be necessary, timely advice about insurance in your local marketplace or the willingness of lenders to fund your business proposal. Our experience and advice can save you time, money and frustration.

Free Prequalification:

• Getting to Know All of the Partners:  We will discuss your organizational structure and make sure it is set up in the best way to find an appropriate lender. Having this conversation before making a bid can prevent having to make changes in the ownership of businesses. It also allows for a free and honest conversation about what will be expected monetarily from each of the partners during the initial setup of the business.

• Choosing Guarantors: Not every partner should necessarily be a guarantor. We can guide you to select guarantors based upon the merits of your project.

• Review Personal Financial Statements: Again, we help all our clients to establish their own personal financial statement, which we then (as needed) share with potential lenders. This process helps us work together to determine what each client can afford and how to best show their personal assets and liabilities to greatest advantage.

If you would like to schedule your free business evaluation, contact Veeraj Patel, our Credit Analyst at 239.294.1664.

If you are considering a loan for purchase or refinance and would like to discuss your plans, feel free to contact our team.  We can conduct a business evaluation and even prequalify you for a loan at no cost to you.

Colorado hotel loan; repeat client buys nearby property

We were happy to close a Colorado hotel loan for a repeat client of ours. This partnership group has found success in the Mountain states. They were eyeing a property not too far from a successful hotel that they previously purchased with a GRP-supported loan. In addition, they discovered that there was an absentee owner. Savvy business owners often target businesses held by out-of-town owners as potential purchases. Often, these properties can be extracted for more revenue. In this case, our clients will be able to manage this hotel along with their other hotel, pooling staff and using similar operating procedures.

GRP Capital Managing Director  Krishan Patel led our team to close this loan. Patel stated, “I know this client group well, as we have closed loans with them before. They are excellent business owners and managers and know the hospitality industry very well, particularly the Colorado hotel business. We supported them through the challenges of purchasing from an out-of-state owner. Now they are ready to have even greater market penetration with their two nearby properties.”

Things to remember when purchasing from Absentee Landlords:

• Who knows this business the best? Out of state (or country) business owners vary in their ownership style. Some really understand all of the properties in their portfolio. Others defer to their management team and know very little. If you are considering purchasing from an absentee landlord, determine if they know their business well and if not, get the contact number of the person who does.

•  Determine property condition Again, depending on the style of the owner, properties without ownership nearby can have deferred maintenance issues. Utilize the appraiser or even your own third party hires to determine the property condition. Be sure to include any needed renovation or upgrades in your loan package, especially if completing these would lead to greater revenue.

•  Get a solid understanding of the financials Even before potential lenders underwrite the loan, you should have a good sense of how the business is doing. What are its challenges and strengths? What kind of management is needed? Most importantly, will you be able to give the attention and oversight needed to make this business profitable?

Our GRP Capital team specializes in finding the right lender for each project. We save our clients time and money, as we research  the best choices for their funding sources. Our experience allows our clients to find funding that is project-appropriate and will allow for sufficient cash flow. If you are considering becoming a first-time (or second or third time!) buyer, we can assist you.

Baton Rouge bridge over river

Refinanced hotel in Louisiana: Timing a Refi

We recently closed a loan for a refinanced hotel. Our Louisiana clients own a profitable, healthy hotel. They purchased it as less experienced buyers, relying on a seller note at the time. Now they were ready to refinance this seller note. They had developed their management resumes and built up their credit. So they approached Senior Associate Ryan Dumas for advice and support.

Ryan Dumas worked with the clients to determine if now was the best time for a refinanced hotel loan. He understood their goals and their business vision. The clients wanted to have a more traditional loan and they wanted to disentangle themselves from the seller. Ryan stated, “We successfully closed this refinanced hotel loan. Their new loan is secure and guaranteed. Now my clients have a bank as a lender and not somebody from the community. They no longer have a lender relationship with the seller; they are just neighbors and colleagues.”

Is Now the Time for a Refinanced Hotel?

• Is your current note maturing? We receive many loan inquiries when current mortgages are maturing. As a note matures, either the entire balance has to be paid off or the loan has to be somehow modified or extended. Maturing notes require negotiation. For many business owners, a pending note maturity is a great date to refinance.

• Can you lower your mortgage payments or pay off your mortgage more quickly?  It is easy to determine if you can save money with a refinance. When we seek out loan offers from our network of lenders, they will provide the terms. These terms will dictate your monthly payments and how long it will take to pay off your loan. You can then determine what the best business decision is. There are closing costs associated with all loans. As a result, you will need to consider how long it will take for your lower payments to offset those costs.

• Are you looking to change your lender? Some clients are interested in developing a new business relationship with a prospective lender. Other clients, like our Louisiana ones, simply wanted to extricate themselves from a loan that felt a little too personal. This can be the case with private notes, especially ones that are held by family or community members.

Our GRP Capital team specializes in finding the right lender for each project. We save our clients time and money, as we research the best choices for their funding sources. Our experience allows our clients to find funding that is project-appropriate and will allow for sufficient cash flow. Whether you are looking to refinance or purchase, we would love to discuss your business plans with you. If you are considering becoming a first-time (or second or third time!) buyer, we can assist you.

Texas RV Park Purchase and Upgrade

GRP Capital is pleased to announce a new loan for the purchase and upgrade of an RV park. This facility is located in Southeast Texas.

Our GRP Capital team worked closely with his client, helping to facilitate the financing. Managing Director Krishan Patel said, “The borrowers were great to work with. They are experienced in this sector. With this purchase, we are helping them expand their portfolio. Our entire GRP Capital team consulted with the clients. We worked diligently to steer them towards a loan that matched their financing needs. Even better, we are making plans for the clients’ next acquisition.”

Why an RV Park is a Great Investment:

• Current Travel Trends: Tourism trends in the United State are favorable for RV park usage. Americans are favoring driving over flying and are anxious to arrive at far-flung destinations.

• Pandemic-Proof: Travel in a recreational vehicle or camper and lodging at an RV park make sense during our new normal. An RV park allows for sociability outside, while protecting vulnerable people from overexposure.

•  More opportunities for market penetration : While there are multiple hotels at many highway exits, this sector is not as crowded. An RV park with updated amenities can capture market share. This requires effective marketing, excellent management and maintenance and good decisions on what amenities drive occupancy.

•  Lenders Like RV Parks : Lenders, particularly SBA lenders, look favorably on this sector of hospitality lending. As a result, GRP Capital can find matches for qualified borrowers.

Our GRP Capital team specializes in finding the right lender for each project. We save our clients time and money, as we research  the best choices for their funding sources. Our experience allows our clients to find funding that is project-appropriate and will allow for sufficient cash flow. If you are considering becoming a first-time (or second or third time!) buyer, we can assist you.

Texas Hotel Owner Closes High Leverage Loan

Our clients already owned a Texas hotel. They were ready to purchase another Texas hotel in the northwest part of the state.

They really wanted to minimize their equity injection.

Each of our clients have different needs. Some are more rate-sensitive, some clients want loans with lenders who will become their primary business relationship. And some, like these clients, are looking for a high leverage loan.

Our GRP Capital Team worked closely with the clients. Managing Director Krishan Patel noted that he was proud of the sensitive guidance during the negotiations of the purchase and sale agreement. He also helped his clients prioritize the aspects of the new loan that were most important to them. “I was pleased that we were able to match these clients with a loan that met their needs. They have great experience in the hospitality industry. As a result, they will maximize the profit of their new hotel. Their ability to keep their equity injection manageable was a critical component of the loan. I look forward to working on other projects with them, as I know their situation and goals well.”

Best Practices for Organizing Your Equity Injection:

During underwriting, the clients worked quickly to provide evidence of their equity injection. The equity injection is the “money down”. If you are contemplating a new loan (not a refinance), here are some tips regarding equity injections.

• Sufficient equity: The lender will require bank statements or statements from stock accounts. These statements must show enough money. Just before closing, clients transfer these funds via wire.

• Dividing it Up: Typically, all of the partners participate in putting money down. Ideally, the equity injection is divided up proportionally among the partners. Most buyers contribute towards the down payment, matching the percentages of ownership.

•  Clean sources of equity : Down payments need to consist of funds that are “clean”. This means that the money has not been recently loaned to you. As you are choosing which accounts will be the source of your equity injection, choose wisely. The lender will “source” any large movements of money into an account (typically more than $1,000). This means you will have to tell the lender where the money came from and often provide a statement (or several) from the source of the transfer.

Our GRP Capital team specializes in finding the right lender for each project. We save our clients time and money, as we research  the best choices for their funding sources. Our experience allows our clients to find funding that is project-appropriate and will allow for sufficient cash flow. If you are considering becoming a first-time (or second or third time!) buyer, we can assist you.

Adjacent Hotels: A Great Business Plan

Our south Texas client recently purchased adjacent hotels.

One hotel was a small, independent property. And on the adjacent property was a Best Western.

GRP Capital worked closely with the buyers, the sellers and the lender on two separate loans that closed on the same day.

Senior Associate Ryan Dumas shared his clients’ vision for the adjacent hotels. “My clients were poised to take ownership of these nearby properties. They will be able to continue to have excellent market penetration on the San Antonio to Houston corridor. They have solid business plans; having two adjacent hotels will make certain aspects of hotel ownership easier for them.”

The Benefits of Owning Adjacent Hotels:

• Reaching More Customers . When one business owner owns two adjacent properties, they have double the opportunities to attract guests. The two hotels can have different rate structures and different amenities (pet friendly or not?). In reservation aggregator websites and the websites for the two hotels, the business owner can differentiate and reach out to a greater variety of customers.

• Staffing Issues:  Many hotels are still struggling with finding and retaining employees. In addition, hotels that have a high and low season are sometimes unable to offer stable employment. However, owners of adjacent hotels can utilize one group of staff members to do the same work in two places, which guarantees more work and therefore greater job stability. The owner can shift employee responsibilities between the two properties as needed.

• Same system; different address. Experienced business owners quickly establish efficient business practices. Setting up employee protocols, cleaning regimens, checkin and checkout procedures for two properties is not appreciably more difficult than setting these up for just one location.

Our GRP Capital team specializes in finding the right lender for each project. We save our clients time and money, as we research the best choices for their funding sources. Our experience allows our clients to find funding that is project-appropriate and will allow for sufficient cash flow. Whether you are looking to refinance or purchase, we would love to discuss your business plans with you. If you are considering becoming a first-time (or second or third time!) buyer, we can assist you.

What about your EIDL Loan?

If you have an EIDL loan (Economic Injury Disaster Loans offered by the Small Business Association), what do you need to know about future loan transactions?

  • What about buying a new business?
  • What about refinancing a current business?
  • What about selling my business?

Many of our clients have an EIDL loan. We encouraged our clients to obtain these during the most restrictive part of the COVID pandemic. These low interest loans gave needed relief to some of the hardest hit industries, including hospitality.

Selling a Business with an EIDL Loan:

• EIDL Loans Mostly Have to Be Paid off poor to sale: Any lender who is funding the purchase of a business with real estate will require that buyers own the property “free and clear”. This means that there cannot be any liens (claims from lenders) on the property or the business. So, sellers must pay off previous EIDL loans prior to or at closing.

• Perhaps One Exception:  Sellers may have multiple businesses or properties. Some sellers, especially larger corporate sellers, may have an EIDL for the parent company but not the smaller component business being sold. If the EIDL is for the parent business, the new lender may find a way to make an exception.

Paying off an EIDL at or before closing:  Be aware that the SBA does not accept payoff via wire. At closing the title or escrow company will have to make out a physical check for the balance of the EIDL. The borrower can find the balance on their SBA portal. The SBA website also has clear instructions for paying off the loan via mail.

I Have an EIDL and I want to Refinance

• Size matters!  If your EIDL loan is small, then the lender may agree to pay it off. They will roll the remainder of the EIDL into the total loan value. If the loan is larger, there are a few possibilities.

• Paying off an EIDL: You may be holding on to the proceeds of the loan (and therefore have cash on hand). But new lenders will not consider the proceeds of the EIDL as an asset without also considering your EIDL loan as a liability. Therefore, a large EIDL may negatively impact your debt to income ratio. The lender may consider that you have too much debt and require you to pay off or pay down the loan.

• Subordinating an EIDL: Often lenders will agree to subordinate an EIDL. This means that they will request permission from the SBA to delay receiving payments for the EIDL until the mortgage has been paid off. Borrowers have to officially request subordination and the SBA has to grant it. This process is not automatic. In addition, requesting subordination can take some time. We have found that subordination happens most easily when we work with our network of SBA preferred lending partners.

I Have Other Businesses with EIDL loans and I’m Getting a New Loan:

The lender will underwrite your entire file and look at your affiliate businesses. If your other businesses are cash flowing and covering your debts, there are no issues with other EIDL loans. We are happy to help you do a self-evaluation of your cash position for all of your businesses. This will help you if you need to make your portfolio stronger prior to looking for financing.

If you are considering a loan for purchase or refinance and would like to discuss your plans,  feel free to contact our team.  We have a network of lenders and can find the best match for your funding needs, saving you time and money, so you can focus on running your business.

EIDL Loans: What to know if you are buying, selling or refinancing

EIDL Loans (Economic Injury Disaster Loans offered by the Small Business Association) have helped many small business owners during the COVID pandemic. These low interest loans gave needed relief to some of the hardest hit industries, including hospitality.

Many business owners have EIDL Loans on the books. What do you need to know? What do you need to do? An EIDL has an impact on selling, buying and refinancing.

I’m Buying or Selling a Business with an EIDL Loan:

• All liens have to be released: Any lender who is funding the purchase of a business with real estate will require that buyers own the property “free and clear”. This means that there cannot be any liens (claims from lenders) on the property or the business. So, sellers must pay off previous EIDL loans be paid off prior to or at closing. Also, previous PPP (Paycheck Protection Program loans) will need to be have been forgiven.

• Perhaps One Exception:  Sellers may have multiple businesses or properties. If the EIDL is for the parent business, the new lender may find a way to make an exception.

Paying off an EIDL:  Be aware that the SBA does not accept payoff via wire. At closing the title or escrow company will have to make out a check for the balance of the EIDL. The borrower can find the balance on their SBA portal. The SBA website also has instructions for paying off the loan via mail.

I Have an EIDL and I want to Refinance

• Size matters!  If your EIDL loan is small, then the lender may agree to pay it off. They will roll the remainder of the EIDL into the total loan value. If the loan is larger, there are a few possibilities.

• Paying off an EIDL: You may be holding on to the proceeds of the loan (and therefore have cash on hand). However, a large EIDL may negatively impact your debt to income ratio. The lender may consider that you have too much debt and require you to pay off or pay down the loan.

• Subordinating an EIDL: Often lenders will agree to subordinate an EIDL. This means that they will request permission from the SBA to delay receiving payments for the EIDL until the mortgage has been paid off. Borrowers have to officially request subordination and the SBA has to grant it. This process is not automatic. In addition, requesting subordination can take some time. We have found that subordination happens most easily when we work with our network of SBA preferred lending partners.

I Have Other Businesses with EIDL loans:

The lender will underwrite your entire file and look at your affiliate businesses. If your businesses are cash flowing and covering your debts, there are no issues with other EIDL loans.

If you are considering a loan for purchase or refinance and would like to discuss your plans,  feel free to contact our team.  We have a network of lenders and can find the best match for your funding needs, saving you time and money, so you can focus on running your business.

Independent Texas Hotel Loan Closes

Our clients were ready to purchase a small, but profitable independent Texas hotel. It was adjacent to another franchised hotel, which they were also in the process of purchasing.

GRP Capital worked closely with the buyers and sellers. We paid particular attention to the specialization required to obtain loans for independent properties.

Senior Associate Ryan Dumas was pleased to close the loan. He remarked, “This independent Texas hotel is perfect for creating two market price points for my clients. The loan is affordable and stable and will allow them to continue the profitability of the current hotel.”

Special considerations regarding Independent Hotels:

• Hotel statistics . Franchised hotels utilize reservation and check-in systems that generate hotel statistics. These statistics include occupancy, ADR (average daily rate) and RevPAR (Revenue per available room). Independent hotel operators may or may not utilize sophisticated programs. Thus, generating this important information (needed by both lenders and appraisers) can be a challenge.

• Sales and Occupancy Tax Records Required:  Most independent hotels do not participate in STR reporting. In addition, they are not using franchise check-in software. As a result, it can can be difficult to ascertain their revenues and profitability. Lenders and appraisers will accept two different third party reports: either business bank statements or sales tax receipts that show the revenue basis of monthly occupancy taxes. Sellers of independent hotels should be prepared to provide one of these sets of documents.

• Financials. It’s our job at GRP Capital to comb through seller financials. We want to make sure they match up with the hotel statistics and the taxes. Then we can provide a very clear picture to lenders and appraisers. We want all of the stakeholders to understand the current profitability of a property and its potential.

Our GRP Capital team specializes in finding the right lender for each project. We save our clients time and money, as we research the best choices for their funding sources. Our experience allows our clients to find funding that is project-appropriate and will allow for sufficient cash flow. Whether you are looking to refinance or purchase, we would love to discuss your business plans with you. If you are considering becoming a first-time (or second or third time!) buyer, we can assist you.

Fast closing to meet a 1031 Exchange Deadline

GRP Capital was happy to help our Florida client purchase a new hotel, using his proceeds from a previous sale. But even more importantly, our client had an imminent 1031 exchange deadline, so he had to use the proceeds quickly. A 1031 exchange, also known as a like-kind exchange, is a real estate investing tool. It allows investors to swap out one investment property for another, deferring certain capital gains taxes.

GRP Capital President Rick Patel and our entire team worked closely with our client, under the added pressure of the 1031 exchange deadline.  

The biggest hurdles were shepherding the loan through the underwriting process, quickly obtaining a survey and working with the franchise team. It was hard work! Rick Patel remarked, “We utilized a third party consulting team to work with the franchise. We had to do this to overcome the mandatory 14 day cooling off period to meet the borrower’s 1031 exchange deadline. In-house, we worked diligently to submit all the required documents quickly and correctly. Timing was absolutely critical for this loan. It was an all hands on deck effort, which we were happy to do for this client.”

What to do if you have a 1031 Exchange Deadline:

• Know your deadline. Many business owners have their eye on purchasing a new property. Sometimes, they plan to sell another asset for their equity injection. That is a great plan. However, make sure the loan is feasible, and that a lender can close the loan to meet your deadline.

• Get all of your own financial documents ready:  Lenders will require taxes to be filed (or extensions), as well as financials that are less than 90 days old. Work with your accountant and other professionals, If you know you will be applying for a loan with a tight deadline. Make sure you have your docs in a row.

• Make it legal:  Work with your attorney so that your borrowing entity has an operating agreement or bylaws, is registered in the correct state and can be licensed correctly.

Our team specializes in finding the right lender for each project. We save our clients time and provide options, as we research different funding sources. Our experience allows our clients to choose the best loan for them. If you are considering a purchase or a refinance, let us know how our GRP Capital team can be of service.