Hotel Construction LoansGround-Up Development Financing $10 million and up
Talk to PeerSense. The capital source sets the terms. Bank construction and debt fund alternatives. Franchise pre approval and PIP reserves coordinated upfront.
Ground up · conversion · extended stay · branded limited service · select service · full service · resort · SBA 504 C to P · debt fund non recourse.
Last updated: ·By Ed Freeman, Capital Advisor. PeerSense
What are typical hotel construction loan rates?
Hotel construction loans price 9% to 12% interest only during construction in May 2026. Bank construction loans: 9% to 10.5% for experienced developers with franchise pre approval. Debt fund: 10% to 12% non recourse for $20M+ institutional deals. SBA 504 construction to permanent: 9% to 10.5% blended with 25 year CDC fixed take out locked at C of O. Max LTC 60% to 70% (85% via SBA 504). Terms 24 to 48 months construction + stabilization.
Published by PeerSense Capital Advisory · Written by Ed Freeman, Founder. Updated May 2026.
Hotel Construction Loan Matrix, Terms by Sponsor Profile and Flag
Hotel construction pricing depends heavily on sponsor track record, franchise pre-approval, and capital structure. Pick your profile below.
| Property Type | Max LTV | Min DSCR | Term | Amortization | Rate Range | Recourse |
|---|---|---|---|---|---|---|
| Bank Construction, Experienced Sponsor (Hampton, HIE, etc.) | 65% | 1.35x stabilized | 30 mo + 6+6 ext | Interest only | 9.0% to 10.0% | Full or partial |
| Bank Construction, First Time Hotel Developer | 55 to 60% | 1.40x stabilized | 30 mo + 6+6 | Interest only | 9.25% to 10.5% | Full personal guarantee |
| SBA 504 Construction to Permanent (Owner Operator) | 85% | 1.35x stabilized | 24 to 30 mo construction + 25 yr CDC perm | Interest only then 25 yr amort | 9.0% to 10.5% blended | Full personal guarantee |
| Debt Fund Construction, Institutional $20M+ | 65% | 1.35x stabilized | 30 to 36 mo + 6+6 | Interest only | 10.5% to 12.0% | Non recourse w/ carve outs |
| Full Service Branded (JW, Westin, Hyatt) | 60 to 65% | 1.40x stabilized | 36 to 48 mo + 6+6 | Interest only | 9.5% to 11.0% | Partial recourse |
| Resort / Destination Hotel | 55 to 60% | 1.50x stabilized | 36 to 48 mo + 6+6 | Interest only | 10.0% to 12.0% | Partial recourse |
| Hotel Conversion (Office → Hotel) | 55 to 65% LTC | 1.35x stabilized | 30 to 36 mo | Interest only | 10.0% to 11.5% | Completion guarantee |
| Extended Stay (Home2, TownePlace, Residence Inn) | 65% | 1.35x stabilized | 30 mo + 6+6 | Interest only | 9.25% to 10.25% | Partial / burn off |
Bank Construction, Experienced Sponsor (Hampton, HIE, etc.)9.0% to 10.0% · 65% LTV
- Max LTV
- 65%
- Min DSCR
- 1.35x stabilized
- Term
- 30 mo + 6+6 ext
- Amortization
- Interest only
- Rate Range
- 9.0% to 10.0%
- Recourse
- Full or partial
Bank Construction, First Time Hotel Developer9.25% to 10.5% · 55 to 60% LTV
- Max LTV
- 55 to 60%
- Min DSCR
- 1.40x stabilized
- Term
- 30 mo + 6+6
- Amortization
- Interest only
- Rate Range
- 9.25% to 10.5%
- Recourse
- Full personal guarantee
SBA 504 Construction to Permanent (Owner Operator)9.0% to 10.5% blended · 85% LTV
- Max LTV
- 85%
- Min DSCR
- 1.35x stabilized
- Term
- 24 to 30 mo construction + 25 yr CDC perm
- Amortization
- Interest only then 25 yr amort
- Rate Range
- 9.0% to 10.5% blended
- Recourse
- Full personal guarantee
Debt Fund Construction, Institutional $20M+10.5% to 12.0% · 65% LTV
- Max LTV
- 65%
- Min DSCR
- 1.35x stabilized
- Term
- 30 to 36 mo + 6+6
- Amortization
- Interest only
- Rate Range
- 10.5% to 12.0%
- Recourse
- Non recourse w/ carve outs
Full Service Branded (JW, Westin, Hyatt)9.5% to 11.0% · 60 to 65% LTV
- Max LTV
- 60 to 65%
- Min DSCR
- 1.40x stabilized
- Term
- 36 to 48 mo + 6+6
- Amortization
- Interest only
- Rate Range
- 9.5% to 11.0%
- Recourse
- Partial recourse
Resort / Destination Hotel10.0% to 12.0% · 55 to 60% LTV
- Max LTV
- 55 to 60%
- Min DSCR
- 1.50x stabilized
- Term
- 36 to 48 mo + 6+6
- Amortization
- Interest only
- Rate Range
- 10.0% to 12.0%
- Recourse
- Partial recourse
Hotel Conversion (Office → Hotel)10.0% to 11.5% · 55 to 65% LTC LTV
- Max LTV
- 55 to 65% LTC
- Min DSCR
- 1.35x stabilized
- Term
- 30 to 36 mo
- Amortization
- Interest only
- Rate Range
- 10.0% to 11.5%
- Recourse
- Completion guarantee
Extended Stay (Home2, TownePlace, Residence Inn)9.25% to 10.25% · 65% LTV
- Max LTV
- 65%
- Min DSCR
- 1.35x stabilized
- Term
- 30 mo + 6+6
- Amortization
- Interest only
- Rate Range
- 9.25% to 10.25%
- Recourse
- Partial / burn off
Indicative only, as of May 2026. Not a quote, commitment or offer of credit. Final pricing, leverage and terms are determined by the lender at underwriting, after full transaction materials are reviewed. PeerSense sources the file. The lender sets pricing. What these terms mean.
Indicative ranges as of May 2026. Individual deal pricing depends on LTV, DSCR, property type, tenant credit, sponsor track record, and market spreads at the time of rate lock. Contact PeerSense for a deal specific indication.
Indicative only, as of October 1, 2026. Not a quote, commitment or offer of credit. Final pricing, leverage and terms are determined by the lender at underwriting, after full transaction materials are reviewed. PeerSense sources the file. The lender sets pricing. What these terms mean.
Why Hotel Construction Is the Most Complex CRE Construction Product
Hotel construction combines every major CRE construction challenge in one deal: ground up CapEx + FF&E + franchise initiation + PIP / brand compliance + extended lease up + post stabilization RevPAR ramp + permanent financing coordination. Banks, debt funds, SBA 504 lenders, and CMBS conduits each play a different role across the construction to permanent lifecycle. Getting the capital stack right at the outset, franchise pre approval, construction lender term sheet, mini perm or SBA 504 take out pre arranged, is the difference between a deal that closes cleanly at stabilization and a forced sale at cap rate compression.
Franchise Pre Approval Gates Construction Financing
Every construction lender requires a signed franchise agreement with comfort letter before issuing the term sheet. Franchise application takes 90 to 120 days from submission. Start the franchise application concurrent with site acquisition | not after. Marriott, Hilton, and IHG franchise approvals are the most frequently seen in lender credit committees.
Construction Draws + Interest Capitalization
Hotel construction loans typically draw 5 to 15 times over 14 to 24 months against verified progress (architect's certification + title update). Interest is capitalized (drawn from loan proceeds rather than paid in cash), so sponsor doesn't need to carry debt service during build. Post C of O, interest becomes cash pay until permanent take out.
Stabilization Milestone Triggers Take Out
Construction loan converts to mini perm at C of O. Mini perm runs 5 to 7 years with RevPAR ramp milestones. At stabilization (typically 12 to 24 months post C of O), refinance into CMBS or institutional fixed rate lender permanent debt at 6.5% to 9.0%. SBA 504 construction to permanent eliminates the mini perm stage | CDC fixed rate locks in at C of O for 25 years.
FF&E + Franchise Fees Are Material Line Items
Hotel FF&E (furniture, fixtures, equipment) runs $15K to $50K per key for limited service, $50K to $150K per key for full service. Franchise initiation fee runs $50K to $200K depending on flag + size. Both are included in LTC calculation on construction loans. Budget for reasonable contingency | FF&E often runs 10 to 20% over initial estimate.
Use Cases We Structure
Ground Up Limited Service (Hampton, HIE)
Experienced developer building a 100 to 140 key limited service hotel in a strong drive to leisure or corporate demand market. Bank construction at 9.0% to 10.0%, 65% LTC. Stabilize at 12 to 18 months post C of O, refinance into CMBS at 6.75% to 7.75%.
SBA 504 Construction to Permanent
Owner operator hotel development under $20M total project. SBA 504 C to P structure: bank first note construction loan converts to bank mini perm at C of O; CDC second note locks in 25 year fixed rate at stabilization. 85% LTC with only 15% sponsor equity.
Extended Stay Hotel Development (Home2, TownePlace)
Extended stay hotels (Home2 Suites, TownePlace Suites, Residence Inn) command premium lender appetite | longer average length of stay, lower operating costs, stronger RevPAR consistency. Bank construction at 9.25% to 10.25%, 65% LTC, strong exit liquidity.
Office to Hotel Adaptive Reuse
Urban office building (post COVID vacant) with zoning support for hotel conversion. Bridge or debt fund construction loan funds acquisition + $150K to $300K/key conversion capex. Stabilize at 24 months, refinance into CMBS at improved NOI basis.
Full Service Resort Development
Ground up full service resort in leisure destination market. Debt fund construction loan at 10.5% to 12% non recourse, 60% LTC. Institutional JV preferred equity fills the equity stack. Stabilize at 24 to 36 months, refinance into CMBS SASB at stabilized RevPAR.
Frequently Asked Questions
What are typical hotel construction loan rates?+
Hotel construction loans price 9% to 12% interest only during construction in May 2026. Bank construction loans: 9% to 10.5% for experienced developers with franchise pre approval. Debt fund construction loans: 10% to 12% with more flexible structure and higher LTC. SBA 504 construction to permanent: 9% to 10.5% blended with 25 year CDC fixed take out.
What LTC on hotel construction?+
Hotel construction LTC caps at 60% to 70% for experienced sponsors with franchise pre approval. First time hotel developers typically at 55% to 60%. SBA 504 construction can achieve 85% LTC (sponsor puts 15% equity). LTC includes land + hard construction + soft costs + FF&E + franchise initiation fee + working capital / marketing reserves.
How long do hotel construction loans typically run?+
Hotel construction loans run 24 to 36 months for limited service (construction + initial lease up) and 36 to 48 months for full service. Construction takes 14 to 24 months; lease up to stabilization (RevPAR ramp to competitive set performance) takes 12 to 24 months. Most deals extend with 6 month options for a fee if stabilization is slower than projected.
What franchise approvals do I need?+
Hotel construction requires franchise pre approval from the flag (Marriott, Hilton, IHG, Choice, Hyatt, Wyndham) before most lenders will issue a term sheet. Pre approval takes 90 to 120 days from franchise application. Franchise comfort letter (confirming the agreement survives foreclosure) is required by every construction lender. We help coordinate franchise application + lender alignment.
What's the typical hotel construction loan structure?+
Standard structure: 60 to 70% LTC construction loan + 15 to 25% sponsor equity + 5 to 15% mezzanine or JV preferred equity (if needed). Construction draws 5 to 15 times over the build period against verified progress. Interest only with capitalized interest (drawn from loan proceeds, not sponsor cash). Stabilization milestone triggers conversion to mini perm or CMBS take out at stabilized DSCR.
Does SBA 504 work for hotel construction?+
Yes, SBA 504 construction to permanent is an excellent structure for owner operator hotel construction under ~$20M total project. 50% bank first note (construction lender), 40% CDC second note (SBA guaranteed, fixed rate 20 to 25 yr), 10% sponsor equity. Rate savings at stabilization (CDC rate locked at 8.5% to 9.5% fixed) represents significant long term value for owner operator hotels.
What's the sponsor track record required?+
Conventional bank hotel construction requires: (1) 2+ completed hotel developments (or 2+ owned operating hotels), (2) franchise specific experience preferred (Hampton developer can finance another Hampton easier than a new flag), (3) liquid equity that covers about 35 percent cash in on a $10 million and up file, (4) strong lender relationships. First time developers typically pair with experienced co GP or use SBA 504 with franchise approved hospitality experience.
Can I get non recourse hotel construction debt?+
Non recourse hotel construction is available on $20M+ projects with institutional sponsors, typically from institutional debt funds at 10.5% to 12% rates and 60% to 65% LTC. Bank construction is typically full recourse or partial recourse with burn off at stabilization milestones. SBA 504 construction is full recourse (personal guarantee required).
Real Reviews from Hotel Sponsors
Live reviews from our verified Google Business Profile
Hotel Financing Sources (May 2026)
- SBA 7(a) Program: Official Guidance: Official SBA 7(a) loan program requirements, caps, and approved uses for hotel acquisition and refinance.
- SBA 504 Program Guide: SBA 504 real estate focused loan program for owner operated hotel acquisition.
- Trepp: Hotel CMBS Data and Maturity Tracker: Industry standard CMBS hotel data including delinquency, maturity wall tracking, and conduit spreads.
- STR / CoStar: Smith Travel Research: Industry standard hotel operating data (RevPAR, ADR, occupancy) used by lenders in pro forma underwriting.
- AHLA: American Hotel and Lodging Association: Industry association reports on hotel operating trends, franchise relationships, and PIP requirements.
- SBA MARC Loan Program: SBA Microfinance Access and Rural Connection Loan Program, underutilized for rural hotel acquisitions.
External links are provided for informational and verification purposes. PeerSense is not affiliated with and does not endorse any third party site. Information was current at the time of publication.
Deals We Structure
Originators, factoring, CMBS, and bridge. Sizes and structures only. No counterparties named. PeerSense sources capital through a curated network of commercial lenders and capital sources.
$10 million and up flagged hotel, CMBS refi
Cash in about 35 percent. Named takeout.
$10 million and up value add multifamily bridge
Named takeout first. Close follows the book.
Indicative only, as of October 1, 2026. Not a quote, commitment or offer of credit. Final pricing, leverage and terms are determined by the lender at underwriting, after full transaction materials are reviewed. PeerSense sources the file. The lender sets pricing. What these terms mean.
Talk to PeerSense
Property address, flag, keys, trailing 12 month RevPAR and NOI, purchase price or payoff, and exit strategy.
Hotel Construction Loan: The desk will reach out. No obligation.
Talk to PeerSense
Send property address, flag, keys, trailing 12 month RevPAR and NOI, purchase price or payoff, and exit strategy. $10 million and up. Cash in about 35 percent.
Fee at closing only · Complimentary initial consultation
Published by PeerSense Capital Advisory · Written by Ed Freeman, Founder. Updated May 2026.
Disclaimer: Hotel financing rates, terms, and availability are subject to change based on flag, RevPAR trajectory, PIP status, sponsor track record, and market conditions. Rate ranges reflect approximate May 2026 hospitality market pricing and may not reflect current conditions at the time of reading. PeerSense sources capital through a curated network of commercial lenders and capital sources. All financing provided by third party lenders subject to their own underwriting.