Franchise Exclusive Lending Programs: Franchisors self-finance or work with lenders to extend hotel financing to franchises. Usually there are conditions, such as a requirement for a comfort letter and adherence to Property Improvement Plan (PIP) mandates. PIPs require a franchise to spend a certain amount of money over time to maintain the brand standards including FF&E and energy efficiency upgrades. Franchisors may offer hotel financing for PIPs, but this funding is also available through other sources, such as banks, the SBA and mezzanine loans.
Private Lenders:Non-bank private sources of hotel financing include real esate investment companies, insurance companies, pensions, and a variety of commercial lenders. Private lenders are an important source for hotel financing when borrowers don't meet bank underwriting standards.
CMBS Conduit Loans:These loans offer attractive terms for large loans on high-end properties. Typically, the LTV ratio is 80% for these non-recourse, fixed rate loans with up to 10 years on a 30 year amortization.