Updated November 05, 2026
Quick answer
Hotels can qualify for SBA 7(a) or 504 loans if over 50% of revenue comes from guests staying 30 days or less. Buyers commonly put in about 15%, though SBA minimums run from 10% on a 7(a) acquisition to 15-20% on a 504. Lenders typically want hotel experience and can often include PIP costs. Axiant Partners, a broker in Boca Raton, can find lenders for hotels. These are typical ranges, not a quote.
Is a Hotel Eligible for an SBA Loan?
SBA SOP 50 10 8.1 treats hotels and motels as eligible if more than 50% of the prior year's revenue comes from transients who stay 30 days or less at a time, and the business complies with zoning and other legal requirements. A start-up's projections must show the same. That test catches extended-stay properties and buildings that have drifted into monthly rentals, so check your numbers early.
A hotel run by an outside management company adds a question: lenders must make sure a management agreement doesn't make the applicant an ineligible passive business, unless the agreement is part of the franchise documents for a brand on the SBA's Franchise Directory.
SBA 7(a), SBA 504 and Other Options Compared
| SBA 7(a) | SBA 504 | CMBS or bank | |
|---|---|---|---|
| Minimum equity | 10% on a change of ownership | 15%, or 20% with a new business | Commonly 25-30% |
| Maximum term | Up to 25 years if 85%+ of costs are real estate | 10, 20 or 25 years | Often 5-10 years |
| Loan limit | $5 million | Depends on project and debenture limits | Lender limit |
| Covers goodwill or PIP | Often both | Fixed assets, not working capital | Case by case |
| Best for | Smaller flagged or strong independent deals | Fixed-rate real estate with more equity | Larger stabilized hotels |
The SBA lists hotels and other lodging as limited or special purpose property, which is why the 504 needs at least 15%, rising to 20% if the project also involves a new business. On a 7(a), lenders may allow up to about 85% loan to value and often set their own higher equity for hotels. For a deeper comparison of larger structures, see SBA vs CMBS vs conventional hotel loans. Figures are SBA rules or typical ranges, not a quote.
Financing a PIP or a Flag Conversion
A property improvement plan is the brand's list of required upgrades, usually triggered by a sale, a new franchise agreement or a change of flag. It can cover rooms, lobbies, signs and systems, and it has a deadline. Lenders read it closely because it changes both the cost and the time before the hotel stabilizes.
- Get the PIP before pricing the deal. The brand generally issues it after an inspection. The buyer's budget should use real contractor quotes.
- Include it in the project. SBA renovation proceeds can be part of the total. That raises the project cost, so your equity requirement rises with it.
- Watch the timing. The SOP allows an additional period for construction or renovation on a real estate loan, but brands set their own completion dates.
- Flag conversions. Moving to a new brand can support a higher room rate, but lenders want to see the franchise approval, conversion PIP and fees. A conversion is underwritten as a renovation of an existing hotel, and it's different from a new build.
Many lenders won't finance ground-up hotel construction through these programs, so a new build is usually a different conversation. See bridge loans if a property needs repositioning before it can qualify.
What Lenders Want From a Buyer
Hotels are a management business. Appendix 15 requires the lender to describe your industry experience and management team, including how daily operations will be run. Beyond that, these are common lender practices:
- Hotel experience. Prior ownership or general manager time is often expected. If you lack it, a strong GM or a brand-approved manager can help.
- Brand strength. Flagged hotels and strong independents are easier to place than properties with weak history.
- Historical numbers. Lenders review recent financials, occupancy, room rate and revenue per available room, often with STR reports.
- Coverage. The SOP's test is 1.25 to 1 for a first acquisition, and lenders may want more. A business valuation is required for a change of ownership.
- Credit and reserves. Many SBA lenders look for roughly 650-680 or higher, plus cash beyond the down payment.
Two rules help hotel buyers. On an owner-occupied special purpose purchase, the lender may rely on projections rather than history if the appraised value fully collateralizes the loan, and no Quality of Earnings report is required. Lenders may still be stricter than that.
Worked Example: Buying a Flagged Hotel With a PIP
Illustrative numbers, not a quote. An experienced operator buys a 70-room limited-service hotel for $3,400,000, with a $500,000 PIP and about $60,000 in closing costs. The estimated guaranty fee, from the FY2027 fee notice, adds about $94,430.
| Item | Amount |
|---|---|
| Total project cost | About $4,054,430 |
| Buyer's equity (15%, above the 10% SBA minimum) | About $608,160 |
| SBA 7(a) loan (85%) | About $3,446,260 |
| Assumed rate and term | 8.25%, 25 years |
| Monthly principal and interest | About $27,170 |
| Annual debt service | About $326,070 |
| Cash flow needed at 1.25 to 1 | About $407,580 a year |
That $407,580 needs to come from the hotel's actual performance after management fees and reserves, so don't count on the post-PIP room rate. The 25-year term applies only if the lender treats it as a special purpose purchase with at least 85% of total project costs in real estate; goodwill-heavy deals can have a shorter blended term and a higher payment.
Steps to Get a Hotel Deal Funded
- Test the transient rule. Pull the revenue split for last year.
- Collect the data. Three years of financials, STR reports, franchise agreement and any existing PIP.
- Ask the brand early. Learn what a sale triggers before you make an offer.
- Write a management plan. Name who runs the property day to day.
- Talk to several lenders. Hotel appetite varies a lot, and many banks don't lend on them at all.
Get matched with hotel lenders, or talk to an SBA specialist at (561) 268-0465. If you already run a hotel and want to buy a second, read how SBA equity rules work on a purchase. For the wider SBA picture, see SBA loans and 100% financing for other owner-occupied buildings.
Frequently Asked Questions
Can you use an SBA loan to buy a hotel?
Yes, if more than 50% of the hotel's prior-year revenue comes from guests staying 30 days or less and it meets zoning and other legal requirements. 7(a) and 504 are both used, and lender appetite varies.
How much down do I need to buy a hotel with an SBA loan?
A 7(a) change of ownership has a 10% SBA minimum, and lenders commonly want about 15% or more on hotels. A 504 needs at least 15% for this property type, or 20% if the project includes a new business.
Can an SBA loan pay for a PIP?
Often. Renovation costs can be part of the project, including a PIP tied to a purchase, as long as the lender is comfortable with the budget and schedule. The extra cost also raises required equity.
Do I need hotel experience to get a loan?
It isn't a stated percentage in SBA rules, but lenders must document your industry experience and management, and many expect prior hotel ownership or a strong general manager.
Can I use an SBA loan to build a new hotel?
SBA rules address new construction, but many lenders avoid ground-up hotels because there's no operating history. Expect a harder search and much more equity.
What is a flag conversion?
It's a change from one hotel brand to another, or from independent to branded. It usually comes with a new franchise agreement and a PIP, both of which lenders will review.
Sources & Further Reading
- SBA SOP 50 10 8.1 (effective October 1, 2026) — The SBA's rules for 7(a) and 504 loans, including equity injection, Appendix 15 on changes of ownership, and eligibility.
- NAGGL: FY 2027 7(a) and 504 fee notices — Summary of SBA Information Notice 5000-881797, the 7(a) upfront guaranty fees effective October 1, 2026.
- SBA 7(a) Loans — Program overview and the $5 million maximum loan amount.
- SBA 504 Loans — Fixed-rate financing for real estate and long-term equipment through Certified Development Companies.
- 13 CFR 120.150: What are SBA's lending criteria? — SBA's criteria for 7(a) lending, including management ability, equity and repayment.
Figures above describe ranges commonly seen across lenders and reflect published guidance as of the date on this page. Confirm current terms with the cited source or your lender before acting.