Updated November 13, 2026
Quick answer
Yes, USDA Business & Industry loans can finance a hotel or motel in a rural town: the rule lists hotels, motels and bed and breakfasts as eligible. Loans go to $25 million per borrower, more than an SBA 7(a), with terms up to the building's useful life, capped at 40 years. The site must be outside cities of more than 50,000 people and their urbanized areas. Axiant Partners, a broker in Boca Raton, matches rural hotel deals with B&I lenders. Ranges here aren't quotes.
Hotels Are Named in the Rule
7 CFR 5001.105(b)(8) lists tourist and recreation facilities, including hotels, motels, bed and breakfast establishments, resort trailer parks and campgrounds, run as a public or private commercial enterprise. Purchases, expansions, renovations and permanent working capital can all be part of the project, along with refinancing in some cases.
That makes B&I a real option for highway-exit motels, small-town flagged hotels and resort properties near parks and lakes, as long as the address passes the USDA eligible areas test. Timeshares and residential housing are excluded. For the program overall, see USDA Business & Industry loans.
Two Hotel Catches in the Appraisal and the Owner's Apartment
Going-concern value comes out. Hotel appraisals usually value the property as an operating business. 7 CFR 5001.203 says any business or going-concern value must be deducted from the market value before the lender discounts collateral. So the collateral number is lower than the price you agreed, and the gap is part of why lenders ask hotel buyers for more equity or extra collateral.
The owner's living quarters are carved out. Owner-occupied housing in a hotel, motel or B&B is allowed only if the pro rata value of the direct owner's living quarters, based on square footage, is deducted from the use of loan proceeds. For example, an owner buying a $900,000 B&B of 4,000 square feet and living in 800 square feet of it would fund $180,000 of the price some other way.
What Lenders Want on a Rural Hotel
- Equity. The rule's floor for an existing business is 10% by one of three tests. A new company formed to buy the hotel can be treated as a new business, with 20% balance sheet equity or 25% of project cost; with construction and an early guarantee, 25%. Lenders commonly ask more on hotels and stay near 80% of collateral value.
- Operating history. Three years of financials, occupancy, average daily rate and STR reports where they exist. Small markets get extra scrutiny on demand.
- Experience. The lender's credit review covers management. Prior hotel ownership or a proven general manager is usually expected.
- A feasibility study for a new business borrowing more than $1 million, prepared by an independent consultant USDA accepts (7 CFR 5001.306). USDA can ask for one on smaller loans too.
- The brand's PIP. If a sale triggers a property improvement plan, lenders want the scope, contractor pricing and the brand's deadline.
Worked Example: A Flagged Hotel With a PIP
Illustrative, not a quote or an offer. An operating company that already owns two hotels buys a third in a town of about 14,000, at $7,200,000 with a $900,000 PIP and $180,000 of closing and soft costs. The lender asks for 20% equity, above the rule's 10% floor for an existing business. Fees use the FY2026 B&I rates.
| Item | Amount |
|---|---|
| Total project cost | $8,280,000 |
| Buyer equity (20%) | $1,656,000 |
| B&I loan | $6,624,000 |
| USDA guarantee | 80% (loan is $5 million or more) |
| Guarantee fee (3.0%) | $158,976 |
| Retention fee, year 1 (0.55%) | $29,146 |
| Assumed rate and term | 8.25%, 25 years |
| Monthly principal and interest | $52,227 |
| Cash flow needed at 1.25x | $783,404 a year |
An SBA 7(a) alone stops at $5 million, so this deal would need a much bigger down payment or a second loan through SBA. The $6,624,000 loan fits in one B&I note. The coverage ratio is a common lender test, not a USDA number, and the cash flow should come from the hotel's history, not the room rate you expect after the PIP.
USDA or SBA for Your Hotel
The SBA side has its own hotel rules: more than half of revenue from stays of 30 days or less, a 504 minimum of 15% for this property type, and the 7(a) $5 million limit. Hotel financing covers them, and SBA vs CMBS vs conventional compares larger structures.
For a rural hotel above $5 million, B&I is often the only guaranteed route. Under that, compare rate and equity in USDA B&I vs SBA 7(a). Fees are broken down in USDA B&I rates and fees.
Get matched with USDA and SBA lenders, or talk to a specialist: (561) 268-0465.
Frequently Asked Questions
Can a USDA loan be used to buy a hotel?
Yes, if it's in an eligible rural area. 7 CFR 5001.105(b)(8) lists hotels, motels, bed and breakfasts, resort trailer parks and campgrounds as eligible B&I projects.
How much can a USDA B&I hotel loan be?
Up to $25 million per borrower, including existing B&I balances. Lenders size the loan to the hotel's cash flow and collateral, so many deals end up smaller.
How much down payment does a USDA hotel loan need?
The rule's floor is 10% for an existing business and 20-25% for a new one, by the tests in 7 CFR 5001.105(d). Lenders commonly ask more on hotels.
Can USDA finance a hotel PIP?
Renovation and expansion are eligible uses, so a PIP can be part of the project cost, which also raises the equity needed.
Can I live in the hotel I buy with a USDA loan?
Yes, but the pro rata value of your living quarters, by square footage, has to be paid for outside the loan proceeds.
Does USDA finance new hotel construction?
Construction is an eligible use. A new business borrowing over $1 million needs a feasibility study, and for a new business a 25% equity floor applies when the guarantee is issued before construction is done.
Sources & Further Reading
- 7 CFR 5001.105: Eligible B&I projects and requirements — Eligible uses, hotels and assisted living, and the minimum equity table for existing and new businesses.
- 7 CFR 5001.203: Appraisals — Appraisal rules, including deducting going-concern value before collateral is discounted.
- 7 CFR 5001.306: Specific application requirements for B&I projects — When a feasibility study is required, including loans over $1 million to a new business.
- 7 CFR 5001.406: Guaranteed loan amounts — B&I loans of up to $25 million per borrower.
- 7 CFR 5001.402: Term length, loan schedule, and repayment — Terms up to the useful life of the assets, capped at 40 years, with no balloon payments.
- OneRD Annual Notice of Fee Rates and Guarantee Percentages, FY2026 (91 FR 11272) — B&I guarantee fee 3.0%, retention fee 0.55% and guarantee of 85% under $5 million or 80% from $5 million to $25 million; reduced-fee tier 1.0% and 0.50%.
- 7 CFR 5001.3: Definitions — The B&I definition of a rural area: outside any city or town of more than 50,000 people and its contiguous urbanized area.
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.