Hotels and the SBA 504 Loan Program
Can you take out a 504 loan for a hotel? Yes, you can! With $194 billion in revenue in 2018, the industry has grown by 4.4% since 2013. These loans are focused on growth and development, so if your hotel is expanding, or you're adding additional equipment, renovating rooms, or otherwise building a better business, you can consider this source of funding.
With a 504 loan, hoteliers will be able to borrow up to $5 million for the purchase of real estate, buildings, construction of buildings, the purchase of additional equipment needed (washing machines, food prep machines for an attached restaurant, etc.). In addition to traditional hotels, borrowers can also take out loans for a variety of other hospitality property types, such as motels, resorts, and bed and breakfasts.
Borrowers Are Eligible for Additional Funds Under the SBA 504 Green Program
Note that you can borrow more than $5 million if you choose to take advantage of the SBA's go green program. In this situation, you can borrow up to $5.5 million per qualifying project. However, you are limited to a cap of $5 million per qualifying project. However, in order to qualify for the an SBA 504 green loan, you will need to reduce your building's energy use by 10%, switch to a new building that uses 10% less energy, or replace 10% of your building's energy use with energy from an alternative source, like wind, solar, or geothermal.
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What are the eligibility requirements for SBA 504 loans for hotels?
In order to qualify for an SBA 504 loan for a hotel, you must be a for-profit business, have a tangible net worth of less than $20 million, and have an average net income of less than $6.5 million after federal income taxes for the past two years. Additionally, the loan must be used for the purchase of real estate, buildings, construction of buildings, or the purchase of additional equipment needed for the hotel. In order to qualify for the SBA 504 green loan, you will need to reduce your building's energy use by 10%, switch to a new building that uses 10% less energy, or replace 10% of your building's energy use with energy from an alternative source, like wind, solar, or geothermal.
What are the benefits of SBA 504 loans for hotels?
The SBA 504 loan program offers a variety of benefits for hotels, including up to $5 million for the purchase of real estate, buildings, construction of buildings, and the purchase of additional equipment needed. In addition, borrowers can take advantage of the SBA's go green program, which allows them to borrow up to $5.5 million per qualifying project, with a cap of $5 million per qualifying project. To qualify for the an SBA 504 green loan, borrowers must reduce their building's energy use by 10%, switch to a new building that uses 10% less energy, or replace 10% of their building's energy use with energy from an alternative source, like wind, solar, or geothermal.
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What are the maximum loan amounts for SBA 504 loans for hotels?
The maximum loan amount for SBA 504 loans for hotels is $5 million. Note that you can borrow more than $5 million if you choose to take advantage of the SBA's go green program. In this situation, you can borrow up to $5.5 million per qualifying project. However, you are limited to a cap of $5 million per qualifying project. Source
What are the interest rates for SBA 504 loans for hotels?
The interest rate on the SBA-guaranteed (CDC) portion is fixed for the full term and set at the monthly SBA debenture sale, not by the individual lender: debenture rates were 5.04% for 25-year, 5.01% for 20-year, and 4.69% for 10-year loans at the July 2026 sale (Eagle Compliance, fiscal agent for the SBA 504 program). The bank's first-lien portion is priced by the bank and may be fixed or variable, subject to SBA's quarterly-published maximum.
It's important to note that, while the rates from a traditional bank may be higher than expected, these commercial real estate loan rates are still considered better than those you will see elsewhere. It is also taken with the CDC loan, which is treated as a traditional property mortgage payment, with a fixed rate that can last 10, 20, or 25 years.
Source: SBA 504 Loans and Commercial Real Estate: What You Need to Know
What are the repayment terms for SBA 504 loans for hotels?
The repayment terms for SBA 504 loans for hotels are up to 25 years (fully amortizing) with the SBA-guaranteed portion at a fixed rate set at the monthly debenture sale (5.04% for 25-year debentures at the July 2026 sale). The loan to value is up to 90% LTC (80% on hotels and motels) and the minimum debt service coverage ratio is 1.20x. The loan is full recourse and assumable with a five-year minimum prepayment. Source 1, Source 2
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