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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.

Creative Financing for Purchase of Fairfield Inn

Our clients had their eyes on a North Texas Fairfield Inn. The sellers no longer wanted to operate this property as they had moved on to other ventures. They were insistent on a very tight timeline to sell.

The clients came to GRP Capital with good information on the property, very strong prior ownership and management experience, but with this tight timeline. They looked to GRP Capital to match them with a lender and to close before the sellers’ deadline.

Our GRP Capital team worked quickly to find a solution. We investigated all types of loan structures from conventional to SBA. Ultimately, the clients and GRP Capital settled on a two part pari passu loan, consisting of partial SBA financing. This loan met the needs of the clients’ leverage and fit into their business plan. A pari passu loan has components of the debt and each part is on equal footing to the other. That means that no loan is subordinate to one another.

Rick Patel, President of GRP Capital remarked, “I was very happy to see our clients take possession of this Fairfield Inn. It took some extra hard work and creativity to structure this loan. As a result, both the clients and the lender are satisfied with the outcome. The new loan has an SBA guaranteed component. And most importantly, we were able to close the loan pretty fast, keeping both the buyers and the sellers satisfied. We are still very confident in the abilities of our experienced hospitality owners to successfully manage newly acquired properties. That being said, we often have to provide guidance to lenders, helping them to see our client’s vision and to collaborate on a loan structure that will be approved by the leadership of the lender.”

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

What Do you Need to Close a Loan Quickly?

The right type of project. Refinancing loans can typically close more quickly than construction loans. Purchasing an existing business with a track record makes underwriting easier and hopefully faster. This loan was for the purchase of an existing hotel with clear, reliable statistics about previous performance. Thus, a fast closing was a doable proposition. 

Type of loan matters, too. A fast closing can be possible for a bridge loan. However, SBA loans can sometimes take longer to underwrite. Understand that lenders and agencies’ timelines may lead the process. 

Good Lines of Communication with a Seller, if applicable. When you are purchasing commercial real estate and the business, the lender will need documents and information from the seller. In some cases, the buyers and sellers are a good match and communicate honestly. Sometimes brokers can be the best point of contact. GRP Capital works and communicates with whomever the borrowers determine can get the information, so we can close.

Current guarantor documents. Be prepared to furnish tax returns. If you have other businesses, make sure you have up-to-date financial statements. Gather business debt schedules. Compile two months worth of personal and business bank statements, especially if you will be making an equity injection. Know your personal debt, like car payments and residential mortgages.

Accurate and thoughtful business plans and projections.Spend some time at the beginning of the loan process creating a strong business plan. This should include not only your projections for future income and expenses. It should also include your ideas for operating and managing the business, including marketing, personnel, financial management and maintenance. 

Engage competent professionals right away. Engage an attorney, even before signing a purchase-sale agreement. Tell your accountant of your loan process, and that you may need more recent financials. If you have had a good experience with a title company in the past, make plans to use them again. If you need a survey, get right on that, as these can take some time.

Need more information on creating a strong business plan?

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.

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.