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Orlando skyline

Bridge Financing for Orlando Hotel

An Orlando client faced a serious loan concern and needed immediate bridge financing. His loan was facing a maturity and the current lender was not interested in refinancing.

Rick Patel, GRP Capital President noted, “Several of our recent hospitality clients are experiencing similar circumstances. The hospitality lending scene is changing and constricting actually. Lenders’ appetite for hospitality is shifting. Certain lenders’ “hospitality buckets” are filling quickly while other lenders are showing greater interest in hospitality. What we provide for our clients, including this one, is industry knowledge. That means we know which lenders to turn to for financing, including bridge financing.”

The bridge financing paid off the previous loan and also provided some needed working capital.

Bridge Financing Basics

  • A bridge loan creates a bridge between a project that requires funds and the necessary financing.
  • Bridge financing is temporary.
  • Obtaining a bridge loan allows the loan to close quickly; therefore you can create the time you need to secure permanent financing solutions.
  • These interim loans often have short term higher interest rates. The borrower understands this is the cost of interim funding.

Reasons for Bridge Financing:

  • Need for immediate closing due to seller demands.
  • Lender Dropout! The lender stops the process during underwriting, putting the entire loan in jeopardy.
  • Quick closing requirements, as buyer wants to use 1031 funds.
  • Buyer demand: The buyer has to have this property and it has to close now! Sometimes our clients will see an underperforming property that has just come on the market. Or they have had their eye on a competing business and knew they wanted to purchase it if it were for sale. These buyers are seriously motivated!
  • Competitive bidding: sellers will often entertain multiple bids from multiple buyers. Being able to close quickly may seal the deal.
  • Our clients may want to use SBA (Small Business Association) guaranteed loans or HUD (Housing and Urban Development) loans or Department of Agriculture loans (for rural properties). These government backed loans take a little longer to close. Clients who use bridge lending can close quickly and then refinance the loan through these agencies.
  • Businesses that need to stabilize. We have many clients who are very talented owners and managers. But new businesses can be risky and lenders can be risk-averse. If borrowers take possession of a business, turn it around and stabilize it, their business can be more attractive to lenders in the near future.

Why Choose GRP Capital?

Our GRP Capital team specializes in crafting financing solutions tailored to each client’s unique goals.

Whether you’re purchasing, refinancing, renovating or building from the ground up, our extensive network of lenders ensures you’ll find funding that aligns with your goals and cash flow needs.

Here’s what sets us apart:

  • We save you time by researching and identifying the best funding options for your project.
  • Our expertise spans various loan products—including non-recourse loans, SBA loans, bridge loans, and conventional financing—so you can navigate even the most complex transactions confidently.
  • Beyond lending, we provide strategic guidance on operational decisions that drive long-term business success.

Options For a Maturing Note

If you have a maturing note, you have the following options:

  • Pay off the remainder of the loan
  • Extend the loan
  • Renew the loan
  • Secure new financing

Choosing the Best Option for your Maturing Note:

• Paying off a maturing note: If you have had a conventional or even SBA mortgage which has been paying down your debt over a long number of years, making your final payment might not be too cumbersome. Do you have a bridge loan or a construction loan? If this is the case, full payoff may not be feasible. Be aware that you will no longer have tax credits for mortgage interest, which will change your taxable income.

• Extending the Loan: This option allows you to get some extra time before making that final payment. Extension is most common when facing balloon payments. Your lender must agree to an extension; in fact, this is not automatically granted. There will likely be some additional interest charges should you choose this option.

• Loan Renewal:  Have you had a good relationship with your lender? Were your payments on time for the most part (with perhaps some pauses during COVID 19 lockdowns)? Your lender MAY be amenable to creating a new loan. This will allow you to continue to pay down debt, reducing your taxable income, while staying with a familiar lending partner. Unfortunately, there are certain industries that are coming up against lender hesitancy to renew loans, including hospitality loans.

Securing a New Loan:  If you cannot go back to your current lender, you must secure new financing. Because of higher interest rates, this is the time to seek advice and figure out the best options.

GRP Capital can be of assistance. We will examine restructuring and reach out to lenders to determine what financing options are likely to be approved. Our team will consider if you should refinance existing debt, retire part of it or even restructure it. In addition, we can help evaluate your financing and cash flow needs. You will have a better sense of what type of financing options exist and choose the best one for your business.

If you would like to discuss your maturing note or any other business issues, feel free to contact our team.  An initial business evaluation is complimentary.

Is It Time to Refinance Your SBA 7a Loan?

Do you have a Small Business Administration SBA 7a loan that is at least three years old?

Have you been meeting your business plan goals and objectives?

Now is a good time to examine what the options are for refinancing your SBA 7a loan.

Timing an SBA 7a Refinance

• Three years: SBA 7a loans have prepayment penalties for the first three years. Therefore, we advise most borrowers to wait until the three years have elapsed before seeking refinances. There are a few select cases, however, where the prepayment penalties are worth it.

• Do you have evidence of meeting profit targets? If you are looking to refinance a loan, lenders need evidence that your business is largely on target. We find that lenders are willing to overlook the market disruptions of COVID, especially during mandatory lockdowns. Other than that, your financial statements should demonstrate sustained profitability. In addition to financial statements, lenders and appraisers typically require evidence from third parties. These can include STR reports or sales tax bills based upon revenue receipts.

• Debt Coverage:  The most important factor in finding affordable, reasonable loans is your current debt coverage. Lenders are not impressed just with the value of your property. In this somewhat volatile economic milieu, demonstrating the ability to pay back loans and having capital reserves is key.

Debt Refinance Possibilities and Other Structures:  We can help you determine the best next steps. It might be to refinance existing debt, retire part of it or even restructure it. We can help evaluate your financing and cash flow needs. You will have a better sense of what type of financing options exist and choose the best one for your business.

If you would like to discuss your SBA 7a loan or any other business plans, feel free to contact our team.  We can conduct a business evaluation, reach out to our lenders, offer advice on bidding and secure financing for you. An initial business evaluation is complimentary.

Money growing

Looking for Loans when Interest Rates are High

We at GRP Capital are not in the business of predicting the future. However, the Federal Reserve has indicated that interest rates will likely continue to be on the higher side through the summer and maybe longer.

How do these higher interest rates affect you? More importantly, what are the best business decisions you can make right now?

Are you looking to purchase an existing business with commercial real estate? Or do you already own a property and are facing an upcoming loan maturity? Are you trying to figure out the timing of a refinance or considering remodeling or reflagging, rolling that into a refi?

Factoring Interest Rates in Your Business Decisions:

  • Be realistic about business expenses. Simply put, if you are contemplating a purchase of a new business or refinancing a maturing note, you need to know how much a loan will cost you. Fortunately, our GRP Capital team can help you look at options. We will examine possible loan terms, so you can know the nuts and bolts. What will the monthly payment be? Is that a reasonable price to pay?
  • Determine your Debt Coverage, not just a property’s Loan to Value: Many business owners and borrowers get very excited about appraisals and how properties are priced. Indeed, lenders do want to see a property with a value that is greater than the loan. However, for certain businesses, especially hospitality, lenders are no longer satisfied with appraised values. They are more concerned with what we call DSCR, which is Debt Service Coverage Ratio. How much of the value of the business and of your own net worth will be on the hook to pay for financing? Is this a reasonable figure? Is this an appropriate risk for the lender?
  • Fixed versus variable interest rates: It might make sense to bet on interest rates going down in the future, but that is a risk. On the other hand, choosing a long-term higher interest rate can also be costly.
  • Bridge loans. Sometimes a transaction needs to occur quickly. This is especially true if the seller is courting multiple buyers and the first one in the gate gets the deal. Basically, bridge lending offers a quick, temporary solution, but sometimes with a high short-term interest rate. It might be a viable option right now when interest rates are already high.

Variables to Consider during Periods of Higher Interest Rates:

• Interest Rate: Duh! What is the rate and is it fixed or variable? Be sure to understand how your lender calculates a variable interest rate. Is there a floor or a ceiling?

• Prepayment Penalties: Many loans have a prepayment penalty if you exit the loan quickly. If you are looking at a loan for a short term, be sure you consider this aspect. It may not make sense to exit a loan when you consider the penalty.

If you would like to discuss loan options or any other business plans, feel free to contact our team.  We can conduct a business evaluation, reach out to our lenders, offer advice on bidding and secure financing for you. An initial business evaluation is complimentary.

Hospitality Loan Options

What is happening in the world of hospitality loan options? Which road should you take?

Are you looking to purchase an existing hotel? Or do you already own a property and are facing an upcoming loan maturity? Are you trying to figure out the timing of a refinance or considering remodeling or reflagging, rolling that into a refi?

Lenders have become more selective about hotel loans. In addition, borrowers have to contend with current high interest rates.

What are the best ways forward?

Different Loan Products to consider:

  • Conventional Loans: There are a few lenders who offer conventional loans, often at fixed prices. However, these loans are typically reserved for the highest echelon of hotels and for larger loan amounts. They also tend to require greater equity injections.
  • USDA Rural Hotel Loans: If your property is not in the heart of an urban area, you may be eligible for a USDA loan, designed to support businesses outside of cities. These loans often have variable interest rates but are adjusted infrequently (some as few as every five years).
  • SBA (Small Business Administration): SBA loans are in many cases the most affordable loan products for hospitality owners with properties of all types, from economy to luxury. Their variable rates mean that when interest rates do eventually go down, borrowers will benefit. In addition, GRP Capital has relationships with many preferred lenders, which decreases the time to close.
  • Bridge loans. Sometimes a transaction needs to occur quickly. This is especially true if the seller is courting multiple buyers and the first one in the gate gets the deal. Bridge lending offers a quick, temporary solution, but sometimes with a high short-term interest rate.

Special Considerations for Purchasing a New Hospitality Business:

• Does a New Purchase Fit into Your business plan? There are hospitality businesses that are for sale now. It could be that the seller is ready for a new project. Or it could be that the seller’s note is coming due and they, too, are weighing their own options. Talk to us about the range of interest rates that you could be paying for a new loan. Then determine if this is affordable. We highly recommend doing this before signing a PSA (Purchase Sale Agreement) or paying any earnest money.

• Determine the True Expenses of a New Business: New businesses have many expenses. We always critically review the seller’s financial statements with our clients. It’s important to understand which fixed costs buyers will be taking on and which costs were ones that will not recur. Of particular interest are the insurance costs, the labor costs, the franchise agreement (which we can give guidance on) and of course the actual cost of the loan.

If you would like to discuss hospitality loan options or any other business plans, feel free to contact our team.  We can conduct a business evaluation, reach out to our lenders, offer advice on bidding and secure financing for you. An initial business evaluation is complimentary.

Options for an Upcoming Loan Maturity

Do you have an upcoming loan maturity? If one of your business loans is due to be paid off soon, now I is the time to figure out the best options going forward.

What To Consider Regarding Loan Maturity

• What Will Occur at Maturity? Will your mortgage be fully paid off? On the other hand, will you have a large balloon payment due? Or is this loan a seller note that is now coming into play? Or will the loan now be only partially paid, but the bank now has discretion to change the structure and the interest rate of the loan?

• What was the Purpose of the Loan? Is the loan that is in loan maturity your primary business mortgage? If so, the maturity of the loan may mean you owe the property outright. That can be beneficial, although you will not be able to claim the previous mortgage expenses. If the maturing loan is a small part of your debt, it might be best to completely pay off this loan.

• Maturing Loan Creates Opportunities:  You can refinance existing debt, retire part of it or even restructure it. We can help evaluate your financing and cash flow needs. You will have a better sense of what type of financing options exist and choose the best one for your business.

If you would like to discuss loan maturity issues or any other business plans, feel free to contact our team.  We can conduct a business evaluation, reach out to our lenders, offer advice on bidding and secure financing for you. An initial business evaluation is complimentary.

Lender Dropout: Prevention and Fixes

Have you heard of lender dropout?

Lender Dropout occurs when you have been working with a specific lender and then….you’re not.

This is a devastating occurrence when it happens. You have put time in with your lender partner. Now, they are no longer interested in your project. The result is a lot of wasted time and effort and possibly some money, too, if you have earnest money or payments due to sellers on a tight schedule.

How Can GRP Capital Help if your Lender Bails?

  • GRP Capital has a large network of lenders, including those that specialize in quick closing. Your project may even be a candidate for bridge lending.
  • We can advise you in restructuring ownership, refining your financial reports and working to improve appraisals to get you a better result.
  • Sometimes, we will advise you to wait and make significant changes in your business plan or operations before seeking financing. We never want our clients to be rejected by the Small Business Administration, which can have longstanding consequences.

Can you prevent lender dropout?

• Be choosy. GRP Capital knows the lenders. We also know that not every lender is a match for you. Some lenders prefer specific geographical areas. Others like certain industries and avoid others.

• Understand nervous lenders. The last several years have thrown lots of things into the lending landscape: higher interest rates, some shaky loan institutions, ups and downs in the stock and bond market reports. Add to these supply chain issues, vagaries of demand and you have met our partners: nervous lenders. They want to lend to serious, stable borrowers. Our job is to make the case that you are dependable as managers and owners and will be able to pay back your loan.

• Talk to GRP Capital before you proffer a bid. It is very tempting to sign a provisional agreement and hand over your earnest money, especially if you think that others are interested in the same piece of commercial real estate. But you need to understand what could be tricky about your loan and what could even slow down your closing.

• Don’t make promises to close quickly. Nervous lenders mean longer closing times. Keep this in mind if you will be penalized or have to produce hard money down payments with a longer closing. .

If you are considering a loan for purchase or refinance or construction 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.