Small Motel Colorado - How to best secure funding/loan?

Question

I'm considering buying a small family run motel (10-15 units) in the Western US for $500,000, this would include the land and the business. I have access to $80,000 in a HELOC, but my wife is currently starting her own business, so we may need this money for cash reserves as she gets going. We own a couple rentals where we are generating cash flow, but nothing extraordinary. Owning a motel like this has been our dream since we moved to the West 6 years ago. Anyway, what would be some of the best options for a loan or to secure funding? Commercial-Business loan/Construction loan/Hard Money Lender, etc? What is a typical down payment on a commercial property? Do I need to write a business plan to secure funding for an already operational motel? Any advice/guidance would be appreciated, thank you!

Will Gaston · Answer

@Mark

@Mark Zajaczkowski it sounds like your best bet would be to go to a small, local bank who would understand/appreciate the property or location. Call and ask for the commercial lender.

My experience is CRE is the down payment would likely vary depending on how much the building/land or worth vacant but I would likely expect 20-25%.

Mark Zajaczkowski · Answer

Account Closed

Does the 10% equity injection vary state by state? Or is the 10% a standard rate nationwide? Thank you

Account Closed · Answer

@Mark Zajaczkowski This is standard all states.

Account Closed · Answer

@Mark Zajaczkowski If you are acquire the business and continue to run it, an SBA loan would fit. You need as little as 10% equity injection.

Brock Freeman · Answer

@Luke Haberkern I'm sorry. I am not an SBA expert, just a private lender. There are SBA brokers around, and maybe even on BP who could answer that question. I do know that many times sellers don't want to wait or extend the PSA to accommodate the longer times an SBA can take; that is where we have stepped in to provide the bridge financing.

@Mark Zajaczkowski you can message me directly on your hard money lender question (and an SBA broker). As for "easier" re the SBA loan, my understanding is that it's more about the timing. However, a good broker who is experienced at SBA loans can help with this.

Luke Henderson · Answer

@Brock Freeman Hey Brock, are you talking about 504 loans? Is it true that they only require 10% DP and can be as low as 3% interest?

Mark Zajaczkowski · Answer

@Brock Freeman

Do you have any recommendations on how to find a hard money lender and what is a typical repayment structure? Is it easier to secure an SBA loan after the fact on purchasing the business/property?

Brock Freeman · Answer

You can also look at doing a bridge or hard money loan to acquire the property. Then get an SBA loan to take out that bridge for long-term financing.

Small Motel Colorado - How to best secure funding/loan?

Small Motel Colorado - How to best secure funding/loan?

Most Popular Reply

9 Replies