Scientific Capita Group, Inc.- A National Hotel Finance Company

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Hotel Loan Programs

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Hotel Loan Programs

Overview

Bridge

CMBS

Construction/Takeout

Conventional

SBA 7a

SBA 504

USDA B&I

With the credit markets in crisis, limited hotel loan programs are available to the hoteliers. The current status of each program in today's market is as follows:

Bridge
This type of program is mostly obtained from private and investor funds and is generally short term, possibly between one to three years maturity, higher interest rate and mostly interest only.

Construction/Take-out
With lenders in crisis, the secondary market nearly dried out, and the recovery time of the credit market uncertain, banks rather not get engaged in lengthy financing projects that pose uncertainty and risk. Construction/Takeout hotel loans specially are nearly extinct in today's credit market.

Conventional
This includes all non-governmental permanent hotel loans originated by banks or non-depository lenders. These loans are extremely hard to obtain as there is no secondary market for the lenders to sell their loans and the lenders do not want to hold unguaranteed commercial loans on their portfolios. Conventional loans are selectively available through alternative sources that use their own funds and do not rely on secondary market such as life companies. However, these sources are very conservative on hotel transaction and have become extremely conservative focused on primary markets and LTVs under 60%.

SBA 7a
With the implementation of TALF and the opening of the credit markets for the guaranteed programs, the 7a loans have been the most widely available loans for hotels in this credit market. Through the Stimulus ARRA bill, many temporary changes were introduced in this program - See SBA changes through the Stimulus bill

SBA 504
Since the disruption of the secondary market in 2008, the 504 first position loans became unavailable and will probably continue as such until the secondary market opens up - See SBA changes through the Stimulus bill

USDA Business and Industry (B&I)
Since the secondary market is receptive to these loans, the lenders became interested in the USDA loans but with the significant time and processing effort required, lenders are recently finding themselves less interested and are mostly focused on 7a loans.

CMBS Conduits
The structure of this loan is such that a lender processes the loan but funds through the secondary market. With the disruption of the secondary market, these loans have been unavailable and will continue to remain so until the secondary market become available again. Unfortunately the TALF efforts have been only able to prevent a disaster rather than making funds widely available for this loan type.

Mezzanines
With the flood of credit and the rapid increase in property valuations, these loans made sense in the past. Most of the Mezzanine lenders got wiped out during the recent Real Estate downturn and with the decline in valuations, it is improbable that this type of loan become available anytime soon.