Can I Use an SBA Loan to Buy a Hotel?
Yes — SBA 7(a) and 504 loans both work for hotel purchases. Here’s what lenders require and how to structure it.
Yes — both the SBA 7(a) and SBA 504 programs can be used to purchase a hotel. Hotels are eligible as owner-operated businesses. The SBA 7(a) is the most common structure for hotel acquisitions because it can finance the real estate, business goodwill, furniture and equipment (FF&E), and working capital in a single loan. The SBA 504 is used when the buyer wants a long-term fixed rate on the real estate component.
SBA 7(a) for Hotel Purchases
The SBA 7(a) can finance up to $5 million. For hotel purchases, it covers the real estate, existing FF&E, business goodwill, and working capital reserve — all in one loan. Terms extend up to 25 years for the real estate portion. Down payment is typically 15–20% because hotels are classified as special-purpose properties.
SBA 504 for Hotel Purchases
The SBA 504 is best when you want a fixed rate on the real estate. It finances up to $5.5 million through the CDC and pairs with a conventional bank loan for 50% of the project. The 504 does not cover working capital or goodwill — so it’s often combined with a 7(a) on larger hotel deals to capture both the fixed rate and the business financing.
Down Payment for Hotels
Expect 15–20% down for hotel purchases under SBA programs. Hotels are classified as special-purpose properties because they’re harder to repurpose and resell. Borrowers with 720+ credit and hospitality experience may qualify toward the lower end of that range.
What Lenders Require
Hotel SBA loans have additional requirements: minimum 680 credit score (720+ preferred), at least two years of hotel or hospitality management experience, a trailing 12-month income statement for the property, a minimum 1.25x Global DSCR, and no major deferred maintenance issues on the property.
Flag and Franchise Requirements
Branded hotels (Marriott, Hilton, IHG) require franchise approval alongside the SBA loan. The franchise agreement terms can affect lender approval and valuation. Independent boutique hotels don’t face this hurdle but may receive more conservative appraisals.
Combining 7(a) + 504
For hotel purchases above $5 million, borrowers can combine a 7(a) and a 504 loan for up to $10 million in SBA-backed financing. This structure captures the flexibility of the 7(a) for business components and the fixed rate of the 504 for the real estate.
