How to Buy a Hotel With an SBA Loan
A hotel acquisition is a real estate loan and a franchise approval rolled into one, and the brand's renovation list can move the real cost of the deal more than anything in the seller's books.
See if your deal qualifies →SBA FOIA 7(a) loan-level data, NAICS 7211*, FY2021 through FY2026.
What you need to put in
Ten percent of the total project cost is the SBA minimum for buying a business, and the project cost is everything the loan pays for: the purchase price, the closing costs, and the working capital you are borrowing to get through the first months.
Half of that ten percent can be a seller note, which is the structure most buyers are hoping for. The catch since June 2025 is that the note has to be on full standby for the entire life of the SBA loan, meaning no principal and no interest paid to the seller for ten years. A note on two year standby, which used to qualify, no longer counts toward your injection. The other five percent has to be real money, and the lender will trace where it came from.
On rate, an acquisition loan of this size prices near Prime plus 2.75 percent, with Prime plus 3.0 percent the SBA ceiling above $350,000. Ten year term, no balloon, and no prepayment penalty at that maturity. If real estate is part of the purchase the term stretches and the arithmetic changes.
What to diligence in a hotel
The generic acquisition checklist covers the financials. These are the ones specific to this sector, and they are where deals here actually go wrong.
The brand approves you, then hands you a PIP
Hotel franchise agreements are generally not freely assignable, so a sale usually ends the seller's agreement and the buyer signs a new one with the brand. As part of that, the franchisor typically inspects the property and issues a property improvement plan (PIP): a list of required renovations with deadlines, paid for by the owner. Get the change-of-ownership PIP before the price is final, because a renovation the seller just finished may not satisfy the brand's current standard. Expect your lender to ask how the PIP will be paid for, whether funded at closing or set aside, so it has to fit the budget from day one.
Occupancy, rate and RevPAR against the market
Hotel revenue is rooms sold times the rate they sold at, and RevPAR (room revenue per available room) puts both in one number. Look at occupancy, average daily rate and RevPAR month by month over at least the last three years, not just the trailing twelve months the seller leads with. If the hotel receives competitive set benchmarking reports, ask for them, because they show whether the hotel is gaining or losing ground against nearby competitors. Then check what is driving the rooms: one construction crew contract or a single corporate account can carry a year and then disappear.
Cross-check room revenue against the occupancy tax filings
Hotels collect and file lodging or occupancy taxes on room revenue, which gives you a second record of sales that the seller did not prepare for the sale. Compare those filings to the property management system reports and the tax returns. While you are there, confirm the filings are current. Whether a buyer can be pursued for a seller's unpaid occupancy tax depends on the state and on how the deal is structured, so make sure the purchase agreement and the closing deal with any balance owed.
Who runs it matters to SBA
Many hotels are run by a third-party management company. SBA treats a business whose management agreement gives the manager sole discretion over operations as an ineligible passive business. If you plan to use a manager, the agreement has to leave you with meaningful oversight: approving the annual budget and larger spending, controlling the bank accounts, and overseeing the staff, who must be your employees. The lender will read the agreement. A management agreement that is part of the franchise disclosure documents for a brand on the SBA Franchise Directory is handled differently, so tell your lender early which you plan to use.
The building is most of the collateral
A hotel purchase is usually mostly real estate. SBA's change of ownership rules treat a hotel whose real estate is integral to the business as an example of a special purpose property, a building designed for one use, and the 504 program lists hotels, motels and other lodging among its limited or special purpose properties. Expect an appraisal from someone with experience valuing hotels as going concerns, and an environmental review on the site. Have the roof, HVAC (including in-room units), elevators, pool, fire and life safety systems and accessibility looked at by someone qualified, because these are big-ticket items that sit outside the PIP and still land on you.
Licensing and regulation in this sector vary by state and change. This is a general description, not advice on your deal, so check anything you are going to rely on against your own state's current rules.
What the lender will ask you about
Beyond the usual credit questions. Have these answered before the file goes in and you save a round trip.
- ·What is the change-of-ownership PIP, what will it cost, and how is it funded?
- ·What have occupancy, ADR and RevPAR done over the last three years, and how does the hotel rank against its competitive set?
- ·Has the franchisor approved the buyer, and when will the new franchise agreement be signed?
- ·Who will run the hotel day to day, and is there a management agreement?
Who actually lends on hotels
GBank has approved more loans in this sector than anyone else since FY2021, at an average of $3.3M. A lender who has done dozens of these already knows what the licence transfer looks like, which is worth more than a slightly better rate.
| # | Lender | Loans | Total Volume | Avg Loan |
|---|---|---|---|---|
| 1 | GBank | 572 | $1.9B | $3.3M |
| 2 | US Metro Bank | 224 | $649.1M | $2.9M |
| 3 | Readycap Lending, LLC | 209 | $480.1M | $2.3M |
| 4 | Shoreham Bank | 208 | $620.1M | $3.0M |
| 5 | Peoples Bank | 196 | $545.9M | $2.8M |
| 6 | Celtic Bank Corporation | 160 | $392.9M | $2.5M |
| 7 | First Western SBLC, LLC | 157 | $321.8M | $2.0M |
| 8 | Bank of Hope | 153 | $436.8M | $2.9M |
Source: SBA FOIA 7(a) loan-level data, NAICS 7211*, FY2021 through FY2026. Lenders with fewer than 3 approved loans in the sector are excluded.
Full hotels & motels lending data →Busiest states for hotels
Buying a hotel: common questions
Is a hotel loan a business loan or a real estate loan?
Both, but mostly real estate. When the land and building are part of the purchase, the loan is largely secured by and structured around the property, and SBA real estate financing carries much longer repayment terms than a business-only acquisition. That longer term is a big part of why hotel deals can cash flow.
Can the PIP be included in the SBA loan?
In many deals, yes: the renovation cost becomes part of the project the loan pays for. Lenders will want contractor bids rather than the brand's rough estimate, and a timeline that meets the brand's deadlines. Get those bids early, because they change the total loan size.
Do I have to keep the flag?
No, but the lender is underwriting the revenue the hotel earns under its current brand. Dropping or changing the flag means underwriting a different business, and expect much closer scrutiny of the projections. If the seller is ending the franchise early, check who is paying any termination fees in the agreement.
Does the hotel brand need SBA approval?
If the brand meets the federal definition of a franchise, it has to be listed on the SBA Franchise Directory before an SBA loan can be made. Check the specific brand on the Directory before you spend money on reports.
How much does it cost to buy a hotel?
Across the sector, the average approved SBA 7(a) loan is $2.4M, taken over 5,153 loans since FY2021. That is the loan, not the purchase price: the loan usually also carries closing costs and working capital, and the buyer puts in at least ten percent on top. Use it as a sense of scale rather than a quote.
How long does an SBA loan to buy a hotel take?
Sixty to ninety days from a complete file is the honest range for a straightforward acquisition, and it is the FILE that sets the clock rather than the bank. A lender with SBA Preferred Lender status approves in house instead of waiting on SBA review, which takes weeks out. Anything that needs a third party, an appraisal, an environmental report, a licence transfer, runs on its own schedule.
What can the loan actually pay for?
The purchase price of the business, the closing costs, working capital for the transition, and the real estate if you are buying the building too. A 7(a) loan for goodwill is typically a ten year term with no balloon and no prepayment penalty. Add owner-occupied real estate and the term stretches, up to twenty five years where the property is the majority of the project.
Looking at a hotel?
Send us the numbers and we will tell you whether it carries the debt, and which lender has done this before. Free to borrowers.
Get Pre-Qualified →