Hotel Financing: Complete Loan Guide for 2026

Hotel financing covers the full range of loan products available to acquire, build, renovate, or refinance hotel and motel properties across the United States. Whether you are purchasing your first limited-service property or expanding a portfolio of branded hotels, understanding your financing options is the first step toward a successful transaction. The U.S. hotel industry encompasses more than 46,000 operating properties and generates over $286.5 billion in annual revenue, making it one of the largest segments of commercial real estate lending.

Lenders evaluate hotel loans differently than other commercial property types because hotel revenue fluctuates with occupancy, seasonality, and local demand. That means borrowers need to understand the specific metrics, requirements, and loan structures that apply to hospitality properties. In this guide, we break down every major hotel financing option, walk through lender requirements, and provide the current rates and terms you need to make an informed decision in 2026.

What Are the Main Hotel Financing Options Available Today?

The most common hotel financing options include SBA 504 loans, SBA 7(a) loans, CMBS conduit loans, conventional bank loans, bridge loans, and DSCR loans. Each program serves different borrower profiles, property types, and investment strategies, so choosing the right one depends on your goals, timeline, and financial position.

The SBA 504 program allows borrowers to put as little as 10% down, with fixed interest rates currently around 6.4% for 25-year terms (SBA.gov, 2025). SBA 504 loans can go up to $20 million, making them suitable for many midscale hotel acquisitions and new construction. The SBA 7(a) program offers more flexibility, with proceeds usable for working capital and equipment in addition to real estate, though capped at $5 million.

CMBS loans provide non-recourse financing for larger hotel properties affiliated with national brands. These fixed-rate, fully assumable loans start at $2 million with no upper limit and can reach 65% to 75% LTV with 10-year terms and up to 30-year amortization.

Bridge loans serve borrowers who need fast capital for acquisitions, renovations, or repositioning before stabilizing for permanent financing. Rates typically fall between 8.5% and 10.5%, with terms of 12 to 36 months.

How Much Does It Cost to Build or Buy a Hotel?

Hotel construction costs vary dramatically by property class and location. According to the HVS 2025 U.S. Hotel Development Cost Survey, the median cost for a limited-service hotel is approximately $167,000 per room, while luxury properties can exceed $500,000 per room. A standard 100-room midscale hotel typically costs between $15 million and $25 million to build from the ground up.

Acquisition costs depend on location, brand, and performance. Economy hotels in secondary markets might trade for $30,000 to $60,000 per room, while upper-upscale properties in prime urban locations can command $200,000 to $400,000 per room. Total development budgets should account for land, hard construction costs, soft costs (architecture, permits, legal fees), FF&E, OS&E, and pre-opening capital.

Elevated construction costs and interest rates continue to slow new development in 2025 and 2026, which may benefit buyers of existing properties by limiting new supply.

What Interest Rates and Terms Should You Expect for Hotel Loans?

Hotel loan interest rates in 2025 to 2026 generally range from 5.5% to 10.5%, depending on the loan program, property quality, borrower strength, and market conditions. SBA 504 loans offer some of the most attractive rates at approximately 6.4% fixed for 25 years, while bridge loans command the highest rates at 8.5% to 10.5% for short-term capital (Commercial Real Estate Loans, 2025).

Conventional bank loans for hotels typically carry rates of 6.5% to 8.0% with terms of 5 to 10 years and amortization of 15 to 25 years. CMBS conduit loans are competitive for well-performing flagged properties, with fixed rates generally in the 6.5% to 7.5% range for 5 to 10 year terms. DSCR loans, which qualify based on the property's cash flow rather than the borrower's personal income, are available in the 6.1% to 8.0% range as of early 2026.

The key factors that influence your rate include the property's net operating income, the loan-to-value ratio, whether the hotel carries a franchise flag, the borrower's credit score and experience, and the overall economic environment. Using a commercial mortgage calculator can help you model different rate and term scenarios before approaching lenders.

What DSCR and LTV Do Lenders Require for Hotel Properties?

Hotel lenders typically require a minimum debt service coverage ratio (DSCR) of 1.25x to 1.50x, which is higher than many other commercial property types due to the income volatility inherent in the hospitality industry. The specific DSCR requirement depends on the loan program, property class, and whether the hotel is franchised or independent.

For CMBS loans, flagged hotels generally need a DSCR of at least 1.40x, while unflagged or independent hotels face a higher threshold of 1.50x (CREFCOA, 2025). SBA loans are more flexible, with minimum DSCR requirements in the 1.15x to 1.25x range. Conventional bank loans typically fall between 1.25x and 1.35x. You can use a DSCR calculator to determine whether your property's net operating income meets lender thresholds before applying.

Loan-to-value ratios for hotel loans typically max out at 65% to 75% for conventional and CMBS programs. SBA 504 loans offer the highest leverage at up to 90% LTV, which translates to just a 10% down payment. Bridge loans generally offer 65% to 75% LTV. In tertiary markets or for properties with weaker operating performance, expect LTVs in the low 60s or even high 50s. Understanding commercial loan down payment requirements is essential to structuring the right capital stack for your project.

Does a Franchise Flag Make a Difference in Hotel Financing?

Yes, franchise affiliation has a significant impact on hotel financing terms, rates, and approval likelihood. Most lenders, particularly SBA lenders, strongly prefer franchise hotels over independent properties because brand recognition reduces revenue risk and provides built-in systems for reservations, loyalty programs, and operational standards (Goodwin Law, 2025).

Flagged hotels typically qualify for lower interest rates, higher leverage, and longer loan terms compared to independent properties. A Marriott, Hilton, or IHG branded hotel with stable occupancy and strong RevPAR will attract far more competitive offers than a comparable independent property. CMBS lenders apply a DSCR requirement of 1.40x for flagged hotels versus 1.50x for unflagged properties, reflecting the reduced risk that comes with brand affiliation.

That said, independent hotels can still secure financing if they demonstrate strong historical cash flows, a unique market position, or a well-known local reputation. Boutique hotels in popular tourist destinations, for example, can perform exceptionally well. The key is presenting at least two to three years of solid operating data and a realistic business plan.

For borrowers considering franchise affiliation, it is important that the franchise agreement term extends beyond the loan maturity date. Lenders may require comfort letters from the franchisor that guarantee the franchise will continue under new ownership if the lender takes control of the property after a default. Many lenders also require reserves equal to approximately 4% of monthly revenues to cover franchise fees and property improvement plans (PIPs).

What Hotel Performance Metrics Do Lenders Evaluate?

Lenders evaluate hotel performance using three core metrics: revenue per available room (RevPAR), average daily rate (ADR), and occupancy rate. These metrics, combined with the property's net operating income and debt service coverage ratio, form the foundation of every hotel loan underwriting decision.

The national average RevPAR in 2025 reached approximately $102.78, with ADR at $162.16 and nationwide occupancy at 62.3% (CoStar/STR, 2025). For 2026, ADR is projected to rise 1% year over year while occupancy is forecast to dip slightly to 62.1%, resulting in modest 0.6% RevPAR growth. However, performance varies dramatically by segment. Luxury hotels posted year-to-date RevPAR growth of 5.3% through mid-2025, while economy properties saw a 1.8% decline during the same period.

Lenders want to see that your hotel's RevPAR, ADR, and occupancy are competitive with or better than the local market average. They will order a STR (Smith Travel Research) report to compare your property against a competitive set of similar hotels in the area. Properties that outperform their comp set on these metrics will receive the most favorable loan terms.

Beyond top-line metrics, lenders also examine departmental profitability, management efficiency, capital expenditure history, and the property's competitive positioning. A strong management team with hospitality experience is a critical factor. If you are new to commercial real estate investing, consider partnering with an experienced hotel operator or management company to strengthen your loan application.

How Does the Hotel Loan Application Process Work?

The hotel loan application process typically takes 45 to 120 days from initial inquiry to closing, depending on the loan type and property complexity. SBA loans tend to take 60 to 90 days, CMBS loans 60 to 120 days, and bridge loans can close in as few as 14 to 30 days for experienced borrowers with clean transactions.

You will need to assemble a loan package that includes your personal financial statement, two to three years of tax returns, occupancy reports, trailing 12-month profit and loss statements, STR reports, your franchise agreement (if applicable), a business plan, and a transaction summary.

Lenders will order a commercial appraisal using the income approach and sales comparison approach. The income approach is heavily weighted for hotels because value is driven primarily by cash flow. Expect appraisal costs of $5,000 to $15,000 depending on property size.

Environmental reports, title insurance, and franchise approval letters are also required before closing. Working with a commercial lending team that understands hospitality can streamline the process and help you avoid pitfalls that delay closings.

What Are the Unique Challenges of Motel and Economy Hotel Financing?

Motels and economy-class hotels face additional financing hurdles because lenders perceive them as higher risk due to lower revenue per room, thinner profit margins, and greater sensitivity to economic downturns. The economy hotel segment saw a 1.8% decline in RevPAR through mid-2025, compared to 5.3% growth in the luxury segment (CBRE, 2025), which reinforces lender caution.

Many traditional banks avoid smaller motel loans entirely, pushing borrowers toward SBA programs or specialty hospitality lenders. SBA 7(a) loans are often the best fit for motel purchases under $5 million because they allow funds to be used for both the real estate acquisition and necessary working capital. For larger motel portfolios or properties needing significant renovation, bridge financing can provide the short-term capital needed to stabilize the property before refinancing into a permanent loan.

Key challenges include limited brand options, deferred maintenance that increases reserves, location-dependent revenue, and vulnerability to alternative lodging competition. To overcome these, present a clear renovation plan with cost estimates, demonstrate local market knowledge, and show a path to competitive occupancy within 12 to 24 months.

Use a bridge loan calculator to model short-term financing costs for a motel renovation and compare that to the long-term returns after repositioning.

Can You Refinance an Existing Hotel Loan for Better Terms?

Yes, hotel refinancing is a common strategy to lower interest rates, extend loan terms, pull out equity, or transition from a bridge loan to permanent financing. Many hotel owners who purchased or built properties during the high-rate environment of 2023 to 2024 are now exploring refinance options as the rate environment evolves.

Refinancing works best when the hotel has demonstrated at least 12 to 24 months of stable or improving performance. Lenders re-underwrite based on current trailing 12-month financials, so boosting your NOI before applying can yield significantly better terms. Strategies include implementing revenue management systems, cutting operating expenses, completing deferred maintenance, and adding ancillary revenue streams.

SBA 504 refinancing allows owners to refinance existing debt with as little as 10% equity, making it attractive for reducing monthly payments or locking in long-term fixed rates. CMBS refinancing suits owners of larger, stabilized, branded properties seeking non-recourse terms.

If you are evaluating whether a refinance makes financial sense, contact our commercial lending team for a no-obligation analysis of your current loan terms versus what is available in the market today.

What Steps Should First-Time Hotel Investors Take to Secure Financing?

First-time hotel investors should begin by building a strong knowledge base of hospitality operations, assembling an experienced team, and identifying the right loan program for their situation. Lenders place significant weight on borrower experience, so first-time buyers should expect to answer detailed questions about their background, management plan, and market knowledge.

Key steps include partnering with an experienced hotel management company, targeting franchise-affiliated properties that give lenders confidence, starting with a smaller property (under 80 rooms), pursuing SBA loans which are more accessible for first-time buyers, and building lender relationships before you identify a specific property.

For acquisition financing, expect a 10% to 25% down payment along with a business plan that includes five-year projections, market analysis, management plan, and capital improvement budget. Lenders want to see that you understand the competitive landscape and brand standards.

If you have experience in other commercial real estate sectors, highlight transferable skills such as property management, financial analysis, and construction oversight. Read our guide on getting a commercial loan with no prior experience for additional strategies.

Ready to explore your hotel financing options? Contact Clearhouse Lending to speak with a hospitality lending specialist who can match you with the right loan program, rate, and terms for your hotel investment.

What Are the Most Common Hotel Financing Questions?

What credit score do you need for a hotel loan? Most hotel lenders require a minimum personal credit score of 680, though some SBA and conventional lenders prefer 700 or higher. A stronger credit score can help you qualify for lower interest rates and better terms. If your credit score is below 680, you may still have options through specialty lenders or bridge loan providers, though expect higher rates and more restrictive terms.

How much down payment is required to buy a hotel? Down payment requirements range from 10% to 35% depending on the loan program. SBA 504 loans offer the lowest down payment at just 10%. SBA 7(a) loans typically require 10% to 20%, while conventional and CMBS loans generally require 25% to 35%. The exact amount depends on the property's performance, location, and your financial strength as a borrower.

Can you get a hotel loan with no experience? It is difficult but possible. Most lenders strongly prefer borrowers with at least two to three years of hotel management or ownership experience. First-time buyers can improve their chances by partnering with an experienced hotel operator, purchasing a franchise-affiliated property, or hiring a reputable third-party management company. SBA loans are generally more accessible for first-time hotel buyers than CMBS or conventional programs.

What is the typical loan term for a hotel mortgage? Hotel loan terms range from 12 months (bridge loans) to 25 years (SBA 504 loans). Conventional bank loans typically offer 5 to 10 year terms with 15 to 25 year amortization. CMBS loans are commonly structured with 5 or 10 year fixed-rate terms and up to 30 year amortization. The right term depends on your investment strategy and how long you plan to hold the property.

Are hotel loans recourse or non-recourse? It depends on the loan type. CMBS loans are typically non-recourse with standard bad-boy carveouts, meaning the lender cannot pursue the borrower's personal assets in most default scenarios. SBA 7(a) loans are full recourse, meaning the borrower is personally liable. SBA 504 loans involve partial recourse on the first mortgage portion. Conventional bank loans are generally full recourse. Non-recourse terms are most accessible through CMBS programs for larger, stabilized properties.

What is a PIP and how does it affect hotel financing? A Property Improvement Plan (PIP) is a document from the franchisor that outlines the required renovations and upgrades a hotel must complete to meet brand standards. PIPs can range from $5,000 to $30,000 per room depending on the scope. Lenders factor PIP costs into their underwriting because these are mandatory expenses that affect the property's cash flow. Borrowers should obtain a PIP estimate before closing to ensure the total project cost fits within the loan structure.

How do seasonal hotels get financing? Seasonal hotels can obtain financing, but lenders apply extra scrutiny to ensure the property generates enough annual income to cover debt service during off-peak months. Lenders average revenue across a full 12-month cycle and may require cash reserves equal to 6 to 12 months of debt service payments. Presenting at least two to three years of consistent seasonal operating data helps demonstrate the predictability of cash flow patterns and strengthens the loan application.

What is the difference between a hotel loan and a standard commercial mortgage? Hotel loans involve more complex underwriting than standard commercial mortgages because hotels are operating businesses, not just real estate. Lenders evaluate management quality, franchise affiliation, RevPAR, ADR, occupancy trends, and competitive positioning in addition to the standard financial metrics used for other commercial properties. Hotels also require higher DSCR ratios (1.25x to 1.50x versus 1.20x for multifamily) and typically receive lower LTV ratios due to income volatility.

Sources: SBA.gov (2025), AHLA 2025 State of the Industry Report, HVS U.S. Hotel Development Cost Survey 2025, CoStar/STR U.S. Hotel Forecast (2025 to 2026), CBRE U.S. Hotels State of the Union (September 2025), Goodwin Law Hotel Financing Considerations (2025), IBISWorld Hotels and Motels Industry Report (2025), PwC Hospitality Outlook 2026.