All Forum Posts by: Dan Wallace

I worked for the FDIC during the 2008/09 recession and with banks that had acquired failed bank portfolios. Inside of these portfolios were a number of hotel loans. From my experience the type of hotel property, what type of clients the hotel is trying attract and other competitors in the immediate market are some of the most important factors. In my opinion during a recession the hardest hit hotels will be those who cater towards business travelers. In a recession one of the first cost cutting measures many businesses take will be to cut travel expense. Many hotels in CBD areas are still not recovered from COVID and many are having trouble covering their debt load.

I now work as a commercial lender and getting financing for hotels can be difficult. The most preferred hotels to finance are flagged, interior corridor and has a strong historical occupancy rate. Hotels still struggling to get occupancy under control or has significant upgrades/PIP, I would stay away from.

I finance these type of projects and I am still seeing cap rates in that range even though yields are US treasuries are starting to push into that range. Some of what we are still dealing with are 1031 buyers who are more focused on finding an acceptable property and not so much on cap rates. My feel is that in both strong markets like California and medical-related projects, the cap rates are going to be in that range. 

I finance hospitality assets and have experience from the lender's perspective, if that helps.

I would not focus too much on providing a personal guarantee. The benefits of getting leverage will dramatically improve your returns versus putting in more cash or bringing in expensive investors who will take all your profit. In the thirty years I have been doing commercial financing, a personal guarantee has rarely been enforced by a lender. Personal guarantees are more used for leverage on the principals in the event the note goes into default. With a personal guarantee the lender will simply apply pressure against the principals providing a personal guarantee forcing the principals to either refinance or payoff the note generally by selling the asset.

Higher leverage generally with SBA either 504 or 7a. 

Lower cost of funds at higher LTV than bringing in investors

With the right SBA lender, you can close within 30 to 45 days

Better fixed rate pricing with 504 program than traditionally bank financing

Generally more flexible underwriting with SBA 7a, and the right SBA lender

I can provide some insights. I'll send you a connection.

I've never heard of this group. If they are not a bank and have a license with the SBA, then they are one of the only 14 non-bank lenders in the US. It may be this group may be just a broker posing as a lender. A NMLS is just for residential lenders so my guess is that they are just brokers. I would recommend caution.

Can you follow up as to whether this group was legit or not?

To clarify a few things: the SBA 7a loan you describe does not involve a 50% conventional and 50% SBA loan. That loan structure does not exist in the SBA world. An SBA 7a loan can go up to 100% under the SBA 7a guaranteed program but the SBA does require personal assets (if available) for additional collateral at that high of a LTV.

You consider that whether you pledge personal assets or not, you will be required to provide a personal guarantee. If you can cash flow at higher leverage then the SBA 7a program may be a great option.

I do know of several SBA lenders. 

I know I am extremely late to this original post but in case anyone came across this I wanted offer my input on SBA loans. As a direct SBA lender I can help anyone navigate the SBA process. 

My group is a top ten national SBA lender and I have been in this industry for 30+ years.