Hotel Acquisition FinancingRates, Leverage, and the Five Capital-Source Archetypes

A hotel acquisition is financed through one of five capital-source archetypes, chosen by deal size, sponsor profile, and whether the asset is stabilized. (1) SBA 7(a) hospitality lenders for owner-operator deals up to the $5M SBA loan cap, roughly 10.5%–11.5% variable, 25-year amortization. (2) SBA 504 for owner-occupied acquisition, low-to-mid 7% fixed debenture, 20–25 years. (3) Regional bank hospitality desks at roughly 7.25%–8.75%, up to 65%–70% LTV, 1.35x DSCR, 5-year fixed with 25-year amortization. (4) Hospitality bridge debt funds at roughly 9%–11.5% interest-only over 24–36 months for value-add or PIP-encumbered acquisitions, up to about 70% loan-to-cost. (5) CMBS conduits at roughly 7.0%–8.5%, 60%–65% LTV, non-recourse, for stabilized branded assets. Sponsor equity is typically 30%–40% of total capitalization on conventional structures. PeerSense is an independent capital advisor, it does not lend, it positions each acquisition and places it with the right source across a curated network of capital sources.

Down payment tracks the structure. Conventional bank and CMBS acquisitions run 30%–40% sponsor equity, because leverage is capped at 60%–70% loan-to-value. Hospitality bridge for value-add or PIP-encumbered acquisitions typically requires 30%–35% equity against total cost, since advance is measured against loan-to-cost rather than purchase price alone. SBA structures are the low-equity path for owner-operators, generally 10%–20% injection, but they carry a full personal guarantee and cap at the $5M SBA 7(a) loan limit. On top of the down payment, plan for 2%–4% of the purchase price in closing costs, a franchise application and transfer fee, a PIP escrow, and a 4%–6% FF&E reserve.

Debt service coverage minimums for hotel acquisition generally run 1.25x to 1.45x depending on the source. Regional bank hospitality desks underwrite to about 1.35x on trailing twelve-month net operating income. CMBS conduits underwrite to about 1.40x on stabilized branded assets and often size to a debt yield floor of 11%–13% as the binding constraint rather than DSCR. SBA 7(a) and SBA 504 hospitality lenders underwrite to about 1.25x global debt service coverage including the sponsor's other obligations. Hospitality bridge lenders underwrite to about 1.20x on stabilized exit rather than day-one coverage, because the asset is being repositioned. In practice debt yield, not DSCR, is what caps proceeds on most $10M-plus hotel acquisitions.

65% loan-to-value is the working anchor for hotel acquisition and the level most conventional sources actually close at. CMBS conduits on stabilized branded assets typically advance 60%–65%. Regional bank hospitality desks advance 65%–70% with recourse. Hospitality bridge funds advance up to about 70% of total cost including the PIP or renovation budget, not 70% of purchase price. SBA structures reach higher leverage against a full personal guarantee and are the exception, not the headline. Hotels are cash-flow-volatile relative to other commercial property types, so lenders discount aggressive projections and size against trailing performance.

Timelines run 30 to 90 days depending on the source. Hospitality bridge debt funds are fastest at roughly 30–45 days because they underwrite the asset and sponsor rather than a credit committee calendar. Regional bank hospitality desks run 45–60 days. CMBS conduits run 60–90 days because of third-party reports, rating-agency review, and loan-document negotiation. SBA 7(a) and SBA 504 run 60–90 days. The single most common cause of delay is the franchise comfort letter, which takes 21–30 days from the flag and should be requested at letter of intent, not at term sheet.

Expect to produce the purchase and sale agreement, three years of operating statements plus trailing twelve-month profit and loss, STR reports covering occupancy, average daily rate and RevPAR with a competitive set index, the current franchise agreement and any PIP letter, a departmental budget and pro forma, the sponsor's personal financial statement and schedule of real estate owned, hotel management experience or an approved third-party operator agreement, and the proposed capital expenditure plan. On the lender side, expect a Phase I environmental report, an MAI appraisal with a market study, a property condition assessment, and a seismic report in applicable zones.

Yes. Hotels are one of the most active SBA hospitality sectors because an owner-operator occupies and runs the business. SBA 7(a) covers acquisition up to the $5M SBA loan cap at roughly 10.5%–11.5% variable, 25-year amortization on real estate, with a full personal guarantee. SBA 504 pairs a bank first mortgage with a long fixed-rate CDC debenture in the low-to-mid 7% range over 20–25 years and suits owner-occupied acquisitions where the sponsor wants long fixed-rate certainty. SBA requires the sponsor to be an operator, not a passive investor, and underwrites to roughly 1.25x global debt service coverage. Post-close liquidity of at least 10% is a practical requirement on most SBA hospitality files.

Match by deal size and asset condition. Under $5M with an owner-operator sponsor: SBA 7(a) or SBA 504. $5M to $15M stabilized limited-service or select-service with a local sponsor: regional bank hospitality desk. Any size where the asset is PIP-encumbered, underperforming, or being reflagged: hospitality bridge debt fund with a pre-mapped permanent take-out. $10M-plus stabilized branded asset where the sponsor wants non-recourse and fixed rate: CMBS conduit. $20M-plus institutional full-service: see the $20M+ institutional tier. Submitting to the wrong archetype costs 30–45 days and often 50–150 basis points of unnecessary spread.

Materially. Lenders price against brand strength, reservation-system contribution, and the franchise agreement's remaining term. A top-tier flag with 10-plus years remaining on the franchise agreement prices tightest and reaches the widest set of capital sources. A franchise agreement with fewer than five years remaining is treated as a refinance risk and usually forces either an extension at closing or a shorter loan term. Independent and soft-brand assets typically price 25–75 basis points wider than an equivalent hard-branded asset. Any outstanding PIP is escrowed at closing and reduces the proceeds available for the purchase itself.

No. PeerSense is an independent capital advisor. It does not lend, it does not fund, and it holds no capital of its own. PeerSense positions the acquisition, structures the request, and places it with the capital source in its curated network whose credit box actually fits the asset, the sponsor, and the exit. Because PeerSense has no balance sheet in the deal, its only incentive is the tightest fit for the borrower. The advisory fee is paid at closing.