Hotel Construction Loans: What You Need to Know in 2014
Anyone who has bought a home knows the process. After saving a down payment, buyers go to the bank to procure a loan to cover the rest of the cost. Sometimes, finding a bank to finance such a loan is easier said than done. After all, some mortgages are hundreds of thousands of dollars, which requires a substantial loan.
Now, just imagine that loan is $10 million. Think about how many banks would hesitate to provide that kind of cash. This is exactly the situation that arises when a new hotel is built. These properties are much larger and more expansive than average homes, which makes them far more expensive to construct. Because of this, securing the necessary money to complete the project is much harder.
Finding a Hotel Loan
An average bank or credit union would never finance a loan of this size. Therefore, when trying to build a new hotel, it is important to seek out larger banks, usually ones with interests all over the world. These banks tend to have access to larger funds, making them better prepared to provide such amounts and undertake the associated risks. Rates and approval will vary depending on the bank and the current economic climate. The builder’s financial history will also be a factor in determining the eligibility for a commercial construction loan.
Obtaining the Right Down Payment
Although there are many differences between private home loans and hotel construction loans, the idea of a down payment is still universally necessary. Although the scale of a hotel project is similar to other types of commercial housing ventures, these builders do not have the advantage of pre-sale funds to convince the lender of the project’s viability. Instead, when trying to obtain a loan for a hotel, it is necessary to provide other business assets as collateral. It is also worthwhile to have other partnerships and backers to provide the necessary funds for a down payment. If there is not serious collateral provided, a bank will not be willing to take the risk.
Most people have private mortgages for 15 or 30 years. When building residentially, a construction loan may last six months or a year. However, building a hotel is a much bigger project, and banks understand that the needs are greater. Therefore, many commercial construction loans may last up to seven years, depending on the scope of the project and the bank’s preferences. However, most banks will allow sufficient time for construction to be completed and for business to start. After all, the hotel needs to start earning money in order to pay back the loan in question.
Obtaining a loan to build a hotel is not just about finances. To the contrary, construction loans are also very strict regarding time. The bank will want to have a precise timeline in order to gauge the progress of the project. This allows the bank to make sure the hotel is completed in a timely fashion, which increases the likelihood of having the loan repaid in full.
Therefore, the loan will specify dates for every phase of construction. Funding is often directly tied to these phases. Instead of being given a lump sum at the beginning of the project, banks will provide money for each part of the project as determined in advance.
Other Construction Issues
When approaching hotel construction, a loan is only part of the issue. Before breaking ground, there are numerous other details to sort through. First, any commercial project needs to have approval from the government. This approval may vary from state to state, so it is important to read up on local ordinances in order to obtain proper approval to break ground.
It is possible that the land in question may not be zoned correctly. Hotels are commercial properties, so the land must be zoned for a commercial project in order to be legal. There are also plenty of restrictions regarding the construction process that must be considered. Every town will have rules about the amount of noise permitted and the hours during which construction is allowed.
Because the stakes are so high with a hotel construction loan, getting appropriate funding with solid terms is essential. Fortunately, no one has to attempt such an endeavor alone. There are businesses available that can help hotel owners find the funding they need on terms they can afford. This way, it is possible to achieve the dream of a new hotel with minimal fuss and risk involved.
Although there are a number of companies that offer such services, one of the best options is Hotel Managers Group. Hotel Managers Group is well-known for its support in managing hotels successfully. The company also works with hotel owners to complete new construction projects. The professionals at Hotel Managers Group can not only help develop the plans, but they can leverage a strong network of financial connections to obtain the best loan possible.
In this regard, Hotel Managers Group is the best choice for planning, construction, development and management. The team at Hotel Managers Group is well versed in all the important financial information and knows the appropriate rules and regulations to make the process as stress-free as possible. This includes information regarding ADA compliance and more.
In addition to this, Hotel Managers Group can help owners secure a loan for renovations as well. To best serve clients, Hotel Managers Group works with hotels to assess the current needs and then enacts solutions to achieve goals. In recent years, Hotel Managers Group has done extensive work in the western United States, making the team well prepared to help clients with any number of construction needs.
The Advantage of Hotel Managers Group
For more information about the benefits of using Hotel Managers Group, be sure to check out their latest construction project at the Comfort Inn in Utah/2013. Alternatively, for examples of their expertise with renovation management, check out the impressive results at La Casa Del Zorro/2013.
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