The most prominent concern for most of our clients is to have a low down payment. Fortunately, SBA financing can be very lenient on down payment requirements when compared to conventional financing. SBA technically will require a 15% equity position on a hotel deal. Most buyers believe that the only way to accomplish this 15% equity position is by putting 15% down payment. However, there are other methods to get to 15% equity position that the bank requires.

One method is via a combination of down payment and additional real estate collateral pledge. For example, the buyer can put 10% down payment and pledge other real estate they own as additional collateral to make up for that last 5% of their equity requirement. An additional method to get to the 15% equity position is with a combination of down payment and seller carry back financing. For example, the buyer can put a 10% down payment and the seller can carry a loan for 5% to make up for the last 5% of their equity requirement. Surprisingly most clients we speak with are not even aware that these are possible on an SBA loan. At HBC we understand how important it is for buyers to keep as much funds in their bank to be used for the business after the loan closes for advertising, minor renovations or just to hold onto for a “rainy day”. Please give us a call on your next deal and we can help you get the lowest down payment financing on your deal.

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