Tag Archives: lender dropout

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.

Texas Borrowers Move from Bridge Loan to Permanent Financing

Our Texas borrowers came to us last year, needing a bridge loan. We accomplished that.

Then we turned our attention to sourcing permanent, affordable financing. And now we accomplished that!

Looking back over the whole process reminds us of all of the challenges that can occur between origination and closing.

The First Goal: Secure Emergency Bridge Loan Financing.

Our clients had their eyes on an upper moderate hotel in South Texas. They had chosen their lender. But this story almost didn’t have a happy ending. Their lender dropped the loan in the middle of underwriting!

Lender dropout is a real problem and it is becoming more common in the current economic climate. And even more upsetting, the seller was adamant about the timeline: no extensions!

The buyers came to us in a bit of a crisis. They needed a loan fast!

Rick Patel and Krishan Patel worked closely with the client partnership group. First GRP Capital recommended a restructuring of the loan. As a result, traditional lenders would be more willing to finance it. But, being realistic, our team recommended a bridge loan. Bridge financing is a short term loan, designed to bridge the gap between undertaking financing and finding a permanent financing product. Bridge loans can be the perfect solution when the loan absolutely has to close, but the clients need more time to get everything right.

The Second Project: Permanent Financing

Once the bridge loan was in place, it was imperative to find permanent financing for our clients. Bridge loans are expensive. As a result, they are a stop-gap, temporary measure.

Ultimately, with some more time, we were able to secure a permanent loan for our clients. In the meantime, they even sustained some hurricane damage. This still did not stop the closing. However, it was a bit delayed while insurance companies reevaluated the situation.

The moral of the story is that hard work and patience and strong financial advice do win out in the end.

Bridge Loan Basics:

• Short-term financing that has to stay short-term. Bridge lenders are interested in short-term financing only. They want to know that clients have an exit strategy to obtain permanent financing.

• Premium comes with a price. Bridge lending has a built in cost, usually a higher interest rate. This is another inducement to find permanent financing quickly.

• Be prepared for careful underwriting: Bridge loans are a somewhat riskier product for the lender, so lenders will work to protect themselves. They will conduct their own underwriting and it will be quite similar to a conventional lender’s underwriting protocol. Bridge lenders want to ensure that your loan will be able to be funded elsewhere pretty quickly. So they will look at your loan structure, your cash positions and your debt coverage before offering even this emergency financing.

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 Buyers Needed Bridge Loan

Our clients had their eyes on an upper moderate hotel in South Texas. They had chosen their lender.

But this story almost didn’t have a happy ending. Their lender dropped the loan in the middle of underwriting!

Lender dropout is a real problem and it is becoming more common in the current economic climate. And even more upsetting, the seller was adamant about the timeline: no extensions!

The buyers came to us in a bit of a crisis. They needed a loan fast!

Rick Patel and Krishan Patel worked closely with the client partnership group. First GRP Capital recommended a restructuring of the loan. As a result, traditional lenders would be more willing to finance it. But, being realistic, they recommended a bridge loan. Bridge financing is a short term loan, designed to bridge the gap between undertaking financing and finding a permanent financing product. Bridge loans can be the perfect solution when the loan absolutely has to close, but the clients need more time to get everything right.

With a lot of work, this story had a happy ending. Our clients are the owners of a new hotel. They have short-term financing and are working with GRP Capital now to finalize their long-term financing needs.

Bridge Loan Basics:

• Short-term financing that has to stay short-term. Bridge lenders are interested in short-term financing only. They want to know that clients have an exit strategy to obtain permanent financing.

• Premium comes with a price. Bridge lending has a built in cost, usually a higher interest rate. This is another inducement to find permanent financing quickly.

• Be prepared for careful underwriting: Bridge loans are a somewhat riskier product for the lender, so lenders will work to protect themselves. They will conduct their own underwriting and it will be quite similar to a conventional lender’s underwriting protocol. Bridge lenders want to ensure that your loan will be able to be funded elsewhere pretty quickly. So they will look at your loan structure, your cash positions and your debt coverage before offering even this emergency financing.

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.