INVESTMENT
USDA LOAN V . SBA LOAN The USDA Business & Industry Loan Program is similar to the SBA 7a Loan Program , but with more benefits in regard to loan amounts , rates and terms . The table below highlights some key differences :
Here are the key differences : rates and terms and support economic development in rural areas that are often underserved .
“ Their fixed interest rates add predictability in a fluctuating interest environment , making them a strategic choice for hotel developers ,” Cordell said .
LOAN ATTRIBUTE |
USDA |
SBA |
|
|
Maximum Loan Size
Minimum Loan Size
|
$ 25 million
$ 2 Million
|
$ 5 million
No Minimum , but commonly no less than $ 30,000
|
USDA LOANS PRESENT AN ADVANTAGEOUS FINANCING AVENUE FOR HOTEL PROJECTS , ESPECIALLY IN TODAY ’ S HIGH-INTEREST-RATE SETTING |
|
Geographic Requirements
Interest Rate Estimates
|
Rural America & U . S . Territories
Wall Street Journal Prime + ( 1-3 %)
|
No Restricted Geographic Area
SBA Prime Rate based Rate
|
– SOK CORDELL , SENIOR MANAGING DIRECTOR ,
CH CAPITAL PARTNERS
|
Interest Rates |
Lender Determined |
Lender Determined |
|
Origination Fees |
2 % |
Not Allowed |
|
DRAWBACKS OF USDA HOTEL LOANS Though USDA loans offer several benefits , eligibility requirements can be restrictive for some businesses , and the loan application process can be lengthy and complex . Additionally , the USDA may require borrowers to provide additional documentation and reports to ensure that the loan is being used for its intended purpose .
OTHER THINGS TO KNOW ABOUT A USDA LOAN
• Given that the B & I loan program is a government guaranteed loan , the agency charges a 3 % guarantee fee — or a 3 % fee on the 80 % of the loan .
• An annual renewal fee that ’ s charged to the borrower each year — 50 basis points of the outstanding guaranteed portion .
• Typically , there are no prepayment penalties on these types of loans because they ’ re permanent long-term financing . The lender typically wants these to stay on the books .
IN SUMMARY USDA hotel loans can be a valuable financing option , especially in the current interest-rate environment , which makes it challenging to get new projects off the ground . These loans offer competitive
68 hotelsmag . com Nov / Dec 2023