All Forum Posts by: Scott Snow

Get financing for the remaining $300k would probably not happen. That would be an equity investor play not debt to get the remaining money. You would be better off going sba if the hotel is decent and has a flag. You can maybe go 10% down but hotels are special use which usually means lenders want more down like 15%. Really depends on the lender and the sba program.

Have you analyzed the financials of the hotel to make sure it is a good deal or profitable? Have you looked at the STAR report to see how it is doing vs it's competition. Do you have any hotel experience that you can show a lender? Who will manage the hotel?

A seller may sell you the hotel with the large payment down without any hotel experience because he will get a good return on the note he gives you and if you aren't able to manage the hotel well the seller will get the hotel back in default.

Like any investing or real estate you need to know the industry and have experience to be successful. A partner could be a route to do this. Many hotels I have seen always have multiple owners for various reasons but experience is definitely one of them.

Anyone one that is 20% or more owner are required by SBA to sign a personal guarantee and the bank at it's discretion can still ask for others. Depending on how much everyone is putting in and their involvement in the hotel you may want them to sign a guarantee but that could be a tough sell like you said. Structuring the deal like that is tough. Just depends on what you want in the end really vs what your investors will do.

Has the bank prequalified or otherwise looked at your deal or where are you in that process?

@Kyle Davis you sound like you are on the right track. There is no getting out of the personal guarantee especially in SBA lending and $3.2MM loan amount. It is a little unusual to be honest that you can get a loan to do a ground up construction hotel without any hotel ownership experience but if you have a strong personal and other assets or investors they can maybe look past that. 

The bank is going to take a hard look at your feasibility study to make sure they area needs the hotel. You may want to work with the bank to have them choose and order the feasibility study so the person you use is on their approved list and they feel like they have the expertise to do the study. Also, there will be a STAR report which will provide average occupancy, average daily rate, revenue per available room, supply, demand, etc. Your contractor will be underwritten to make sure they have the experience to build the project. 

They will also consider what tier of your franchise flag will be used compared to others and for the location. The franchise will suggest you have 25% because you need post-closing liquidity while the hotel ramps up to reach stabilization and occupancy. I would think the bank will require that as well as the number 1 failure of businesses is lack of working capital. 

Your rate is very good but your terms could be better as you could go with a higher rate that adjusts every 5 years but get a 10 year balloon note and a 25 year maturity or even some will do no balloon note 5 year adjust on a 25 year amortization. Remember if your note balloons you will have to renew which means going through credit process again and probably more fees/appraisals so something to weigh as far as lower rate with short term vs higher rate with longer maturity. Ever bank prices a little different. 

You probably have a pretty good handle on things as an appraiser but I would suggest maybe getting a partner with hotel experience to help you out but that is definitely a personal choice. 

@Manolo D. most loans require someone to guarantee. In the case of SBA loans the rule is anyone with 20% or more ownership would have to guaranty. It is not clear to me if you are looking for a line of credit or a term loan & for how much? If you are trying to go conventional the requirements will be much hard with lower LTV allowed and more conservative underwriting. Banks do look harder at industries related to the construction industry but that doesn't mean you can't get a loan. On Deck does lots of small loans that are comparatively expensive to SBA or traditional bank loans. They have more relaxed underwriting but you pay for that in higher rates.

Business credit or Paydex score also looks at how you pay your payables to your vendors/suppliers that report the information and not really how you pay a business loan. As far as your personal credit score the only thing that is done is your score is pulled on most SBA and conventional loans. Those loans don't get reported to your personal score as they are business loans and not personal.

You probably should be checking with your vendors to see if they report information to help build your business score.

@Chrs L. BPO is a brokers price opinion of value. 

@ Dexter Morris

The virtual office concept with rooms available to rent is definitely becoming more popular. SBA might be a tough option as you would have to show you occupy 51% of the property to be eligible which may be hard in a situation like that depending on the space. I would make sure the property first fits for your wife as an attorney and then see if the virtual office concept would work.

I do direct SBA loans and we lend nationwide on commercial properties that qualify for SBA. I also have a former colleague in the Buckhead area that could help.

Let me know how I can help.

Scott

Sorry, it double posted.

Getting your own independent appraisal would be wasting money as the SBA lender will require their own appraisal anyway. You will have to play the game to figure out a good price. If you don't like or trust your broker then I would get a new one. Make sure you occupy 51% for SBA purposes. I would recommend starting to work with the sba lender ASAP to get that lined up so you are ahead of the game. I lend in CA if you need any help or have more questions.

Not sure this would actually qualify for SBA lending. To buy a property and rent it to your own business you have to own the active business as well. If they just want you to find office space that wouldn't fit SBA. What do you mean by a branch of the company? Is this like a franchise concept or what? There are some exceptions for SBA lending that could work like franchise locations or other but this is not sounding like that.

You should probably contact your local SBA district office to see who can help you with that. Here is the link for the Louisana office. https://www.sba.gov/offices/district/la/new-orleans