Tag Archives: South Florida loans

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.

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.