Loans for hotels and motels

The short version

Hotel and owner	First call	Also price
Owner-operator buying or refinancing a limited-service hotel	Bank with SBA (owner-occupied programs)	Conventional bank loan
Stabilized branded hotel, investor owner, non-recourse wanted	CMBS conduit	Bank
PIP, renovation or brand conversion	Debt fund, bridge	Bank with a renovation holdback
Large full-service or resort hotel	SASB, debt fund	CMBS, mezzanine
New construction	Construction loan, SBA for owner-operators	C-PACE for qualifying systems
Hotel on a ground lease	Leasehold financing

Agency, FHA multifamily and DSCR rental programs do not lend on hotels.

Programs ranked for a stabilized branded hotel

Rank	Program	Wins when	Loses when
1	CMBS conduit	Non-recourse, fixed rate, takes secondary and tertiary markets	Defeasance, FF&E and PIP reserves, cash management triggers
2	Bank	Owner-operators, local relationships, flexible prepayment	Recourse, lower leverage, shorter fixed term
3	SBA (owner-operators)	Higher leverage and longer amortization for operators	Owner-operator only; size limits; personal guarantee
4	Debt fund	Transitional plans, PIPs, larger loans	Floating rate, cost
5	Bridge	Speed, smaller transitional deals	Floating rate, short term
6	SASB	Large assets and portfolios	Small and mid-size hotels

What hotel underwriters focus on

• Trailing 12 months, by month. Lenders size on trailing NOI, and look at each month to see seasonality and whether the last few months are better or worse than the year.
• Occupancy, ADR and RevPAR against the competitive set. Third-party comp set reports show whether the hotel gains or loses share.
• Franchise agreement. The brand, the remaining term (usually required to run past the loan maturity), and a comfort letter from the franchisor that lets the lender keep the flag after a foreclosure.
• PIP. Required renovations and their cost and timing. The lender either sizes with the PIP funded at closing or sizes on the as-is hotel.
• FF&E reserve. An ongoing reserve for furniture, fixtures and equipment, usually a percentage of revenue, deducted in the underwritten NOI.
• Management. A third-party manager’s fee and agreement, or the owner-operator’s track record. Lenders underwrite a market management fee either way.
• Revenue mix. Rooms versus food, beverage and meeting income. Non-room income is often discounted.
• Labor and insurance costs. Lenders underwrite current wage levels and a current insurance quote, not last year’s figures.

Sizing example (illustration)

An illustration, not a quote. A 120-room limited-service hotel: $145 average daily rate, 72% occupancy, $4,572,720 of room revenue and $4,847,000 of total revenue. NOI after a management fee and an FF&E reserve is $1,454,000 (an assumed 30% margin), valued at $16,160,000 (a 9.0% cap rate). Assumed lender tests: 60% LTV, 1.50x DSCR on a 25-year schedule at an illustrative 7.40%, and a 13% debt yield. These are assumptions for the example, not program limits.

Test	Arithmetic	Loan
LTV	$16,160,000 x 60%	$9,696,000
DSCR	$1,454,000 / 1.50 = $969,300; / 8.79% constant	$11,028,000
Debt yield	$1,454,000 / 13%	$11,185,000
Loan	lowest test	$9,696,000 (LTV binds)

Now add a $2,400,000 PIP ($20,000 a room) required at sale. The lender does not raise the loan; it requires the PIP to be funded at closing, so the buyer’s cash need rises by $2.4 million on top of the down payment. The same hotel with no PIP is a very different equity check. Use the debt yield calculator to see how sensitive the loan is to a weaker year.

Market reading

Measure	Reading
Conduit hotel debt yield, June to August 2026 (CRED iQ)	22.4%1
CMBS lodging delinquency, September 2026 (Trepp)	6.18%3
Originations by property, Q2 2026 versus Q2 2025 (MBA)	Retail up 61%, office up 47%, hotel up 19%, multifamily up 8%, industrial up 6%, health care down 19%4
Originations by property, Q2 2026 versus Q1 (MBA)	Industrial up 38%, office up 23%, multifamily up 15%, retail up 3%, hotel down 36%, health care down 50% from Q1 20264
Share of balances maturing in 2026 (MBA)	Hotel 30%, industrial 23%, office 17%, health care 15%, multifamily 13%2

Hotel lending is up from a year earlier but fell from the first quarter, and a large share of hotel debt matures this year. Expect lenders to be selective and to ask for more equity on hotels with a PIP due.

Programs to avoid

• Multifamily agency, FHA and DSCR rental programs. Not eligible.
• CMBS when a brand change or major renovation is near. Servicer consent for a re-flag or a large capital plan is slow.
• Hard money on a hotel with real operating history. A debt fund or bank bridge is usually cheaper and better structured.