Hotel financing in 2026 splits across three main programs by deal size and flag. SBA 504 finances hotels up to $5.5M at 10% down, ~6% blended rate, 20–25 year amortization — best for independent and economy properties. CMBS finances flagged hotels $5M–$50M at 25–30% down, 6.5–8% fixed rate, 10-year balloon with 25–30 year amortization — standard for Marriott, Hilton, IHG, Hyatt, Wyndham, Choice properties. Conventional bank or life-company debt handles $10M+ deals with strong sponsors at 25–35% down. DSCR 1.30–1.40x minimum across all programs. Franchise approval + PIP estimate required on flagged.
Hotel financing is one of the most segmented categories in commercial real estate lending. Lenders treat a $4M independent economy hotel completely differently from a $20M Marriott Courtyard, and the right financing program varies by deal size, flag, and sponsor experience. This guide breaks down the three main paths — SBA 504, CMBS, conventional — with rate, equity, and timing benchmarks for each. For related see SBA 7(a) vs 504 and CMBS vs life-company vs agency debt.
SBA 504 for Hotels Under $5.5M
The default program for owner-operators buying independent, economy, or smaller flagged hotels:
- Structure: 50% bank first mortgage + 40% SBA debenture + 10% buyer equity
- Loan size: Up to $5M ($5.5M for projects meeting public-policy or green-energy criteria)
- Rate: ~6% blended (debenture portion fixed at 25-yr rate, currently ~5.5–6%; bank first mortgage 6–8%)
- Term: 20–25 years amortization on real estate, 10 years on FF&E (furniture, fixtures, equipment)
- Equity: 10% standard; 15% on new construction or change-of-ownership where the buyer has no prior hotel experience
- Close time: 60–90 days through a Preferred Lender Bank
- Lenders: Live Oak Bank (specialty hotel team), Celtic Bank, Byline Bank, US Bank Practice + Hospitality
SBA 504 hotels typically come with the most flexibility on first-time buyers and value-add deals. The trade-off is the 60–90 day close and SBA documentation overhead.
CMBS for Flagged Hotels $5M–$50M
CMBS (Commercial Mortgage-Backed Securities) is the standard for institutional-quality flagged hotels:
- Loan size: $5M to $100M+ (sweet spot $5M–$50M for flagged hotel CMBS)
- Rate: 6.5–8% fixed (10-yr Treasury + 250–400 bps spread)
- Term: 10-year balloon with 25–30 year amortization — refinance or sell at maturity
- LTV: 65–70% max (25–35% buyer equity required)
- DSCR: 1.40x at close standard
- Non-recourse typically (unlike SBA which always requires personal guarantee)
- Prepayment: Defeasance or yield maintenance — expensive to refinance early
- Top originators: JPMorgan, Wells Fargo, Deutsche Bank, Citi, Morgan Stanley, Goldman Sachs
CMBS is the right tool for sponsors who want non-recourse debt on a stabilized, flagged property and don't plan to refinance before year 10.
Conventional Bank & Life-Company Debt $10M+
For experienced sponsors with deeper balance sheets:
- Rate: 6–7.5% (life-company often best in class)
- LTV: 60–75% (25–40% equity)
- Term: 5, 7, or 10-year balloon with 25-yr amortization
- Recourse: Usually partial recourse on stronger sponsors; full recourse on weaker
- Flexibility: More flexible covenants than CMBS; better treatment of bridge-to-perm scenarios
- Top providers: Wells Fargo, JPMorgan, Bank of America commercial; Prudential, MetLife, New York Life (life-company)
Hotel Bridge & Construction Loans
For acquisition timing or new-build:
- Bridge loans: 9–12% interest-only, 12–36 month terms, 65–75% LTV. Used for value-add or distressed acquisitions where you'll refinance into permanent debt after stabilization.
- Construction loans: 70–75% LTC (loan-to-cost), 8–11% rate, interest-only during construction. Convert to permanent (SBA 504, CMBS, or conventional) at certificate of occupancy.
- Top providers: Madison Realty Capital, Mosaic Real Estate, Calmwater Capital, RREEF, plus regional bridge specialty lenders.
Franchise Approval & PIP
For flagged hotels, the deal won't close without two pieces:
- Franchise approval letter: Brand approves the buyer as an acceptable franchisee. Each major flag has a different approval timeline (Marriott 60–90 days, Hilton 45–75 days, IHG 30–60 days).
- PIP (Property Improvement Plan): Brand-mandated upgrades to bring the property up to current standards. PIP estimate becomes a holdback or escrow at close. Range $500K–$5M+ depending on flag, age, and condition.
Start the franchise approval process at LOI — it's often the bottleneck on closing timeline.
Next Step
Get matched with hotel lenders — SBA Preferred Lender Banks, CMBS originators, life-company, and bridge specialists. See also SBA 504 vs 7(a) decision tree and CMBS vs life-company vs agency debt.
Frequently Asked Questions
How do you finance a hotel?
By size and type: SBA 504 for owner-operated hotels under about $5.5M, CMBS for flagged hotels roughly $5M–$50M, conventional bank and life-company debt for larger deals, and bridge or construction loans for repositioning and ground-up.
Can you get an SBA loan for a hotel?
Yes — SBA 504 and 7(a) finance owner-operated hotels, often with a lower down payment than conventional, which is why smaller independent and franchised hotels favor the SBA route.
What is a PIP and how does it affect hotel financing?
A property improvement plan is the brand’s required renovation list for franchise approval or renewal. Lenders factor PIP costs into the deal, and an unfunded PIP can stall financing until it is accounted for.
What do hotel lenders evaluate?
Flag and franchise approval, RevPAR and operating history, the PIP, the market and competitive set, and the sponsor’s hospitality experience. Brand strength and stable performance unlock the best terms.
Frequently Asked Questions
How do you finance a hotel purchase?
Three main paths in 2026. SBA 504 for hotels up to $5.5M (50% bank loan + 40% SBA debenture + 10% buyer equity, ~6% blended, 20–25 yr term). CMBS for flagged hotels $5M–$50M (25–30% down, 6.5–8% fixed, 10-yr balloon with 25–30 yr amortization). Conventional bank or life-company debt for stronger sponsors on $10M+ deals (25–35% down, 6–7.5%). Independent hotels and economy properties usually go SBA 504; major-brand flagged hotels go CMBS.
What credit score do you need for a hotel loan?
SBA 504: 680+ FICO, 10–15% buyer equity, 2+ years management experience strongly preferred. CMBS: focused on the property cash flow and flag rather than personal FICO, but sponsors typically 680+ with $1M+ net worth and prior hotel ownership. Conventional bank: 700+ FICO, $5M+ liquid net worth, prior hotel operating experience required for most lenders.
What's the typical DSCR requirement for a hotel loan?
DSCR 1.30–1.40x minimum for most hotel lenders — meaning trailing 12-month NOI must cover annual debt service by at least 30%. CMBS lenders often want 1.40x at close on stabilized properties. New-build or value-add hotels with projected DSCR may qualify at 1.20x with reserves. RevPAR (revenue per available room) volatility means hotel lenders run more conservative DSCR than multifamily or industrial.
Can you get a hotel loan for a franchise (Marriott, Hilton, Holiday Inn)?
Yes — flagged hotel financing is often easier than independent hotel financing because lenders view brand systems as lower risk. Most major flags (Marriott, Hilton, IHG, Hyatt, Wyndham, Choice) have preferred-lender lists with banks experienced in their PIP (Property Improvement Plan) and franchise agreement requirements. Lenders will require an executed franchise agreement + PIP estimate as part of the loan file.
How long does hotel financing take to close?
SBA 504 hotel: 60–90 days through a Preferred Lender Bank. CMBS: 60–90 days from term sheet (longer with PIP estimates and franchise approval). Conventional bank: 45–75 days. Hotel bridge loan for acquisitions needing fast close: 21–45 days at 9–12% rates. Plan 90–120 days from LOI to close on permanent debt deals.