The SBA 7(a) loan guarantee program allows commercial banks to make loans on owner-occupied commercial real estate that would otherwise be considered too risky. Hotels are considered particularly risky by many commercial banks. Most limited service hotels are owner-operated and qualify for SBA financing.
The SBA 7(a) program has some attractive features, such as 75%-90% loan-to-value (LTV) and loan term and amortization up to 25 years. However, most SBA 7(a) loans are floating rate based on the prime rate index. The margin is typically 1.0%-2.75% over the prime rate index. Since the prime rate is currently 5.5%, the interest rate on SBA 7(a) hotels is currently 6.5%-8.25%, which in not very attractive.
“We reviewed a list of outstanding SBA 7(a) hotel loans and determined that over 500 SBA loans are eligible to be refinanced into fixed-rate CMBS conduit loans at roughly 5%, fixed for 10 years,” commented Michael D. Sneden, Executive Vice President at ValueXpress. “We want to help these owners save thousands of dollars in interest expense, so we are actively seeking these owners to help them refinance their hotels.
If you currently have an SBA 7(a) loan and want to refinance into a fixed-rate CMBS conduit loan, contact Mike Sneden at email@example.com, Dennis Suh at firstname.lastname@example.org or Jay Bhakta at email@example.com.