Tag Archives: refi

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.

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.

What’s in a Good Business Plan?

Many lenders require borrowers to create a business plan. A well-crafted business plan shows a borrower’s intentions. Crucially, this business plan is evidence that they are ready to take on debt to fund an existing or new enterprise.

Elements of a Strong Business Plan:

• Market Analysis: Lenders can be located all over the country. As a result, they may not know about the exact site of your business. They need to know about your business’ location and its strengths in addition to your position in your industry. What locally will drive people to your business? Who are your targeted customers? Who is your competition and what are your proposed advantages over them? Finally, are there market trends that support this enterprise?

• Detailed Plans for future Operations and Management: How is your business going to be structured? Most importantly, will this business be owner-managed or will you be hiring a management team? What experiences does your management team have in this industry? How will you handle hiring, training and supervision of employees? Who will be in charge of monitoring financials?

• Financial Projections: Creating a three year detailed financial projection can bolster a borrower’s case. Fortunately, GRP Capital is adept at helping to create, revise and analyze these documents in consultation with our clients. Financial projections need to include as many categories as you can think of. These categories include franchise fees if applicable, insurance, payroll, contract labor, daily operational costs and continued capital expenditures and renovations as needed.

• Strategies for Marketing: How will you get the word out there to your customers? Will you depend on a franchise for a marketing platform? Ultimately, do you have a plan to differentiate yourself from your competitors? Will you hire a marketing director? Who is responsible for monitoring online reviews and responding when possible?

• Possible Roadblocks: Try to imagine the scenarios that could be challenging. Specifically consider what are the risks in this business and in this location. How could you handle supply disruptions? Are there issues that could impact worker retention? If you are buying a business, what challenges did the sellers face and how would you handle these challenges if they recur?

Let GRP Capital Help You Craft a Strong Business Plan

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.