Tag Archives: hospitality loans

Louisiana Baton Rouge hotel

Louisiana Hotel Operator Bought Hotel

Congratulations to our Louisiana client, who purchased his first hotel.

Sometimes the way into business ownership is to first work in the business. Our client had been operating and leasing a hotel, with an eye to eventually owning

The client showed fortitude through the ups and downs of the Louisiana hospitality marketplace. The larger Louisiana hotel industry has had some soft spots. Even this hotel has not as profitable as before, but is outperforming in this specific marketplace.

Senior Associate Ryan Dumas worked very hard with this client as he encountered some challenges. Ryan said, “My team and I gave a lot of time and attention to this first-time buyer. I personally collaborated with him to prepare for the appraisal and lender site visits. It was really important for him to feel confident in being able to express his business plan and vision for the process. We also worked closely with the client’s attorney to help deal with title issues and revising operating agreements and filings.”

Tips for First Time Business Owners

  • Spend time on an accurate and complete management resume, which highlights your skills.
  • Work on a three year business plan, considering expected revenues and expenses.
  • Monitor your own personal cash flow and build up your savings.
  • You will have to prove your ability to use the business profits to pay for the new mortgage. Be sure you have adequate debt coverage. GRP Capital can review your financial statements, focusing on debt coverage.
  • If you aren’t already, be sure that you receive monthly financial statements including balance sheets from the current owners.
  • Know your business: its statistics, its regular payrolls costs, anticipated insurance premiums, and other regular and occasional expenses.
  • Are there upcoming deferred maintenance that will become your responsibility? How will you pay for them?
  • Hire an attorney. This is a very big step and you will be spending money and have financial responsibilities. An experienced commercial real estate attorney protects you from typical roadblocks.

Why Choose GRP Capital?

Our GRP Capital team specializes in crafting financing solutions tailored to each client’s unique goals. We even have experience with lender dropouts and critically timed funding needs.

Whether you’re purchasing, refinancing, 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.

Pennsylvania farmland

Pennsylvania Hotel Purchased with 504 Loan

Our clients successfully purchased a Pennsylvania hotel loan, using the SBA 504 loan program. They felt that the property had good revenue potential and that they were an ideal set of owner/managers.

Ultimately, GRP Capital matched the clients with a senior lender and a Community Development Corporation. Both of these are needed for a 504 loan. SBA 504 loans are especially attractive right now in the hospitality realm. Conventional lenders can still be hesitant to lend money for hotel businesses, especially outside large metropolitan areas. But the SBA guaranty is enticing to a larger group of lenders. In addition, an SBA 504 loan can be used for slightly more expensive loans

Senior Associate Ryan Dumas really enjoyed working with this partnership group. He stated, “These guys were ideal partners. They are strong, experienced, hands-on operators, who have shown previous success as owner/operators. Most importantly, they were organized, motivated and had a strong business plan. At least one partner knew the area well and was ready to be on-site. This property will benefit from their hands-on, knowledgeable management.”

Advantages of an SBA 504 Loan

  • Lower down payment/equity injection
  • Competitive fixed-rate financing for the life of the loan
  • Long repayment periods (up to 25 years)
  • Affordable payments as a result of the loan repayment periods, which impacts cash flow immediately

Should you consider a 504 loan?

• Are you and all owners of the borrowing entity U.S. Citizens? As of this writing, the SBA regulations require that an applicant for a 504 loan or a 7A loan must consist of 100% citizens. (In the past, a borrowing entity could have a small percentage of permanent residents, that is Green Card holders.)

• Are you current with all previous SBA loans? Each partner of the borrowing entity will have to disclose their current and past SBA loans. Any loans that are not in good standing could delay or prevent the loan from closing. Be particularly mindful of previous EIDL (Economic Injury Disaster Loans). How to find out if you are current with your EIDL loans?

• What’s your timeline? SBA 504 loans can take a little bit longer to close, because two entities are underwriting the loan. If you are considering accessing this type of loan, make sure your Purchase Sale Agreement (PSA) allows enough time to close. Consider engaging an attorney to represent you through this part of the process.

More information about the SBA Debenture Process

Why Choose GRP Capital?

Our GRP Capital team specializes in crafting financing solutions tailored to each client’s unique goals. We even have experience with lender dropouts and critically timed funding needs.

Whether you’re purchasing, refinancing, 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.

Blueprint for hotel construction loan

Hotel Construction Loan Closes

Hotel construction loans can be complicated. And our Florida clients’ hotel construction loan had hit some roadblocks.

They were busily building a Fairfield Inn, working closely with their general contractor (GC). They had secured an original construction loan to cover the earliest costs of the project. However, their lender ended up not renewing their loan in the midst of the construction process.

Our clients were in a pickle: they were mid-construction but without secure financing. They come to GRP Capital for our advice and for stable lending. We were very pleased to secure permanent funding and they are on target to welcome guests in the very near future.

Rick Patel, GRP Capital President reflected on the loan closing, stating, “We really wanted to help these clients. They know the hospitality market and were well capitalized for this large construction project. They had just experienced a lender drop-off during a critical time. As a result, this could have been an anxious time. Instead, we all worked steadily as a team through a number of issues. We always had faith in our clients and their vision for this Fairfield construction. And we believe we conveyed that story to the lenders, too. Ultimately, I was proud of the client partners and our GRP Capital team.”

Hotel Construction Loans Basics:

• Do your due diligence on a general contractor There is no more important person during the construction process than your GC. Make sure your GC has done a similar project and that they have gone through a lender approval process. Your GC manages every aspect of construction, from hiring subcontractors and staying on top of permitting. Even more importantly, your GC is in charge of producing and maintaining a budget and a an up-to-date log of all costs incurred.

• Engage a knowledgeable attorney: Construction costs can be high. Nevertheless, don’t try to save money by not engaging a knowledgeable attorney early in the process. Expert legal help from the beginning can save you time and money as you get closer to closing. Your lawyer can help guide you through the regulatory maze and also work to mitigate risks in case of disputes and other issues.

• Keep meticulous records on ongoing expenses: Construction loans are a moving target, especially if money is already being spent. Lenders want to reimburse their clients for genuine expenses, but need the expenses organized in specific ways. Your GC and the lender will be collaborating on this. Again, a GC with good interpersonal skills is an asset in this phase, too.

• Don’t start work until you have permits: Clients often get quite excited with a new construction project and want to break ground as soon as the ink is dry on the land purchase. We cannot emphasize enough the important of first obtaining permits. Your attorney and your GC should know the local landscape, in terms of permitting authorities. Take the time now, so everything is above board or you may have early unnecessary costs that you cannot recoup.

Why Choose GRP Capital?

Our GRP Capital team specializes in crafting financing solutions tailored to each client’s unique goals. We even have experience with lender dropouts and critically timed funding needs.

Whether you’re purchasing, refinancing, 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.

East texas yellow rose

New Franchise for East Texas Hotel Loan

Our East Texas clients were ready for a new franchise. After operating a Wyndham Baymont property for several years, they were ready to switch to an IHG Garner flagged hotel. The change would bring down their franchise fees. In addition, the new franchise affiliation would also decrease their third party booking fees. Finally, their new loan refinanced previous debt and also covered a lot of the cost of the reflagging.

GRP Capital worked hard to find a lender willing to make a hospitality loan outside of the largest Texas metropolises. Helping the lender understand the benefits of the new franchise was crucial to the underwriting process.

Krishan Patel, Managing Director of GRP Capital stated, “The hotel owners had demonstrated very strong prior management. Their hotel was already healthy and cash flowing. They had done their due diligence and believed that affiliating with a new franchise would have an immediate impact on both their revenues and their expenses. Ultimately, it was our job to tell their story to lenders and find a good match for them. I was very pleased that this loan closed quickly. Hospitality loans outside the major cities often are harder to place and close, but this project was strong from the beginning.”

In the end, having a large lender network allowed GRP Capital to find an appropriate lender and close the loan as quickly as possible.

Are You Considering a New Franchise Affiliation?

• Compare franchise fees: A basic part of a franchise agreement is the percentage of revenues (franchise fee) that come directly to the franchise. So it’s important to compare these numbers. However, be aware that there is variety in the industry. Franchise fees differ not only by flag, but also by type of property (economy, mid-scale, luxury).

• Determine how your franchise affiliation benefits you: Different franchises and different brands within the franchise offer various benefits. Does your franchise have a popular loyalty program? That can really improve your market penetration. Does your brand have general strong marketing and advertising that benefits the franchisees?

• Calculate the costs for reflagging: What will your immediate costs be? You will have to engage in a PIP (Property Improvement Plan). The PIP typically includes refreshing and renovations from the parking lot to the lobby to the guest rooms. And sometimes these are quite extensive. Calculate these costs from furniture to labor, to a big new outdoor sign.

• Consider hiring an attorney to negotiate with the franchise: Your franchise agreement is a long, complex document, that obligates you for many years. An attorney with experience in dealing with franchises can negotiate fees as well as the PIP components to your advantage. This can save time and also position you best in your marketplace.

• Choose the best timing for a transition. A new franchise requires multiple steps. Consider your labor pool and your high season. How can you fit in a transition that is the least disruptive and costly to your business? Do you need to build in some interest only time in your loan if your revenues will be sharply curtailed?

• Learn about all types of loans: There are many types of hospitality loans, including conventional loans, SBA loans, bridge loans and non-recourse loans. Small Business Administration (SBA) loans are often the best matches for hospitality loans. Crucially, the SBA is willing to guarantee a larger variety of hospitality loans, including economy and mid-scale properties.

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, 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.

Refinance for Carolina Maturing Note

Mortgages are not forever and a maturing note means it is time to take action right away.

Our North Carolina client owned a franchised hotel. His mortgage was maturing and had a balloon payment at the end. Previously, he had renewed his mortgage with his existing lender. However, his lender’s appetite for hospitality lending had changed. The bank leadership had already filled their quota of hospitality loans. They no longer wanted to refinance or renew his maturing note.

We have seen multiple cases of lenders not refinancing or renewing a maturing note. This can be due to the leadership directives of the financial institution, their internal industry quotas or internal risk assessment.

Ultimately, our client turned to GRP Capital to find a suitable lender, one who had room in their portfolio for a hospitality loan.

Krishan Patel, Managing Director of GRP Capital stated, “Our client was hopeful that their current lender would renew their mortgage and was distressed when that was not the case. Throughout the process of finding him a new loan, I personally kept in regular contact with the current lender. We had a good working relationship, even after the date of the note maturation passed. I regularly reassured the lender that we were in the process of securing financing. Fostering a relationship with both his current lender and the new one was critical, as it turned out that our client had a family emergency. This emergency caused a delay in closing, but one which was communicated to all stakeholders.”

Having a large lender network allowed GRP Capital to find an appropriate lender and close the loan as quickly as possible.

Planning for Your Maturing Note:

• Explore your current lender’s options: Well before your note matures, contact your current lender. Inquire if it is possible to renew or refinance and what the details of the new loan would be in terms of monthly costs and ultimate maturity details.

• Determine what is most important to you: Are you concerned about government guarantees? Are you rate-sensitive? Does your loan need to have a certain length? Each borrower has definite priorities. Decide what are your 1-3 most important components of a loan.

• Don’t delay in dealing with a maturing note: Whatever you do, start working on financing at least six months prior to maturation.

• Preserve Your Relationship with Your Current Lender: Pay your mortgage on time. If additional documents are requested like financial statements or an updated appraisal, be compliant and responsive. Ask your lender to prepare a loan history and eventually a payoff statement.

• Get your documents ready. If you are considering a refinance, gather your materials about your business operations (financial statements, business bank statements, budgets and projections). And also assemble the personal documents of any guarantors including three years of tax returns, personal financial statements and information about any other businesses of which you own 20% or more.

• Why should I consider an SBA loan?:  Small Business Administration (SBA) loans are often the best matches. For instance, the SBA is willing to guarantee a larger variety of hospitality loans, including economy and mid-scale properties.

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, 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.

Gulf Coast Hotel Loan Nets Huge Savings

Timing a refinance can be critical.

Our Florida clients had a somewhat expensive loan and wanted to refinance into a more affordable loan.

Not every loan is perfect and the borrowing partners had some bumps in the road. First of all, they wanted to change ownership of the loan. And more significantly, the hotel’s revenues were a little soft, reflecting what is happening right now in certain (but not all) Florida markets.

Changing the partnership required reviewing the operating agreements with our team and legal counsel. It’s very important that operating agreements match up with filed K1’s.

The revenue issue was a little worrisome. However, the lender was aware that a more affordable loan would free up expenses and increase profitability right away. In addition, the owners had sensible plans for operating through continued lower occupancy. Dynamic pricing and hands-on management would definitely be crucial.

Ultimately, the loan closed. Our clients had to bring some money to the table, which is not always the case in refinances. But within six months of closing, they will be still be in Florida high season. More importantly, all of their closing costs will have paid for themselves, with the decreased loan costs.

Krishan Patel, Managing Director of GRP Capital stated, “We really wanted to help these borrowers. They are repeat clients of ours. We knew that the most important aspect of their refinance was its affordability, and we focused all of our energy on getting the most competitive rates within the tight hospitality lending market.

As a Florida-based company, we also have a reputation for understanding the various marketplaces within this complex state. Lenders look to us for our knowledge and our projections regarding future business profitability. “

Timing Your Refinance:

• Interest Rates: Know what the ranges of interest rates are out there for your type of business. Rates will vary between conventional, SBA, non-recourse and bridge financing. And interest rates can vary by business project. GRP Capital can obtain a variety of term sheets for you after you determine what the most important aspects of a loan are.

• Determine what is most important to you: Are you concerned about government guarantees? Are you rate-sensitive? Does your loan need to have a certain length? Each borrower has definite priorities. Decide what are your 1-3 most important components of a loan.

• Don’t delay in dealing with a maturing note: If you have a note that is maturing, check with your current lender to see if they are interested in extending or refinancing first, particularly if you have a good working relationship with them. There are expenses when you change lenders and you have to determine if that is in your best interest. Whatever you do, start working on this at least six months prior to maturation so you aren’t stuck without financing.

• Be prepared for pre-pay penalties: Do your homework on your current loan. Be sure that you don’t have pre-pay penalties. These are additional costs that the lender tacks on if you wish to pay off a loan early. Many loans have a decreasing pre-pay structure so that there is a larger penalty at the beginning of a loan and this amount decreases and then disappears. Sometimes it is advisable to refinance, even if there is a prepay. This is especially true if the new loan’s savings outweigh the prepay penalties within a fairly short period.

• Why should I consider an SBA loan?:  Small Business Administration (SBA) loans are often the best matches. For instance, the SBA is willing to guarantee a larger variety of hospitality loans, including economy and mid-scale properties.

• Get your documents ready. If you are considering a refinance, gather your materials about your business operations (financial statements, business bank statements, budgets and projections). And also assemble the personal documents of any guarantors including three years of tax returns, personal financial statements and information about any other businesses of which you own 20% or more.

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, 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.

Beach seen through a drop of water

Complex South Florida Hotel Loan Closed

Our client partnership group needed a Florida hotel loan. They were ready to purchase an underperforming hotel in South Florida. The hotel showed potential for growth, particularly with our partners’ plans to be hands-on right away. Currently, the hotel was owned by remote partners.

Krishan Patel, Managing Director of GRP Capital stated, “This partnership group consisted of a management team who were ready to enter the Florida market for the first time. The Florida hotel loan marketplace is complex and the lender pool has narrowed. We were able to secure competitive financing, requiring strategic structuring of the partnership. Our guidance was key to ensuring there was SBA eligibility, which is often critical in Florida hotel loans, especially in the mid-scale and economy sectors.”

The entire GRP Capital team worked together on all of the components of this loan. We even made sure one of the partners was able to sign his documents, while traveling on a ship!

Florida Hotel Loan FAQ’s:

• What should I do about insurance while I’m looking for financing? If you’re refinancing, just inform your agent that you’ll need updated insurance certificates. If you are purchasing a new property, start getting insurance quotes ASAP, especially if a lender is requiring flood and/or wind coverage. These extra coverages can take more time to procure. If you don’t have an agent, you can ask the seller if they are satisfied with their insurance agent. That person knows the property already. We also keep an updated list of trusted agents in our database.

• How come my own local bank won’t just loan me the money? This happens a lot! Different lenders have different interests for a variety of loans! We know our lender network well. That means we know who is interested in hospitality loans and who is not. That saves you time and money.

• Why should I consider an SBA loan?:  Small Business Administration (SBA) loans are often the best matches for certain hotel properties. The SBA is willing to guarantee a larger variety of hospitality loans, including economy and mid-scale properties.

• What about Hotel Statistics? The Florida marketplace is diverse with certain areas performing better than others. Accurate hotel statistics, through STR reports, financials and occupancy tax records are critical. These documents provide the fullest picture of the hotel’s revenue. As a result, the lender can feel more comfortable in underwriting and approving the loan.

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, 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.