Hotel Construction Loan

A hotel construction loan will certainly be needed to build the vastly popular get a way escapes that Americans have come to expect and use. Whether it is a new hotel in the Rockies with roaring fireplaces, gyms, spas and even clothing stores as well as the private ski slopes with all amenities or a new five star guest place in the middle of a large urban setting, the need for big money will certainly be provided by a hotel construction loan. This kind of lending agreement that will come provide tens of millions or even hundreds of millions of dollars will be complex and very involved, perhaps tapping into a number of different lending resources. This is not a playground for amateurs. And the unprepared will have their dreams and aspirations shattered.

So an individual or a partnership wants to build a one thousand room western themed hotel just outside a major city in the southwest. This guest place will have four spas, three swimming pools, three restaurants and riding stables with paths over a one hundred and fifty acre wilderness area. While the developers have been looking in several cities, a five hundred acre parcel meeting all the needs for the project's success has been found outside a large city in Oklahoma. Since it has just gone on market days ago, the company initiating this project must move quickly to obtain the land and begin development. So the first type of hotel construction loan that must be obtained is what is called acquisition and development lening agreement. This borrowing plan will buy the land, and provide the funds for clearing, leveling and making places for construction, parking and other sites. If the developer is a first timer at a project this large, a hard money loan may be needed. This is a high interest, high points, short term lending agreement probably from one investor in the Oklahoma area that is familiar with this tract of land and sees the potential.

As the land is being prepared, the developers are looking for big money to fund the construction phase of the project. A type of hotel construction loan that might be considered during this time is called a construction mini-perm lending agreement. This kind of loan is often used when an income producing property such as a hotel has not yet proven its value, so banks or investors provide a short term construction loan to get the project built and allow the hotel to develop an income track record of usually no more than three years. Since this loan may be based a great deal on speculation, it will be a high interest lending agreement, usually coupled with a balloon payment at the end of the three years. The world of high finance can carry with it a great deal of stress and worry, but for the Christian there is always a sense of peace no matter the circumstances. "Therefore being justified by faith, we have peace with God through our Lord Jesus Christ." (Romans 5:1)

The preparation to get massive amounts of money for a hotel construction loan takes literally hundreds of hours. There are many factors going into whether a loan of this size will ever be included, but the following are the absolute minimum ingredients. First an executive summary must be written giving an overall picture of what the project will be. Included in this overview are reasons for this project to be physically located where it is, the target demographic and the reason this segment of the population will visit this particular hotel and other over arching reasons for the project's immediate and long lasting success. Secondly, detailed resumes of all the main players in the project need to be included in the loan request. This would include the architect, the general contractor and even the partners in the development company and each resume should include projects already completed.

A request for a hotel construction loan must also include a pro-forma projection which is kind of like looking into a gumball machine and guessing how many pieces of gum there are there for future earnings of the hotel but all based on solid reasons the figures are given. A pro-forma projection will also include property demographics, absorption studies which show how quickly the costs of the building can be absorbed into the overall value of the entire facility and marketing and management plans. But not only must a pro-forma report be included in securing a hotel construction loan, but also a personal financial statement must be presented for every major player in the scenario. This would include statements for the general contractor and all partners in the development company for the past three years. Finally, pre sales must be reported. In the case of the hotel construction loan request, detailed reports of visits to the upcoming hotel's website, phone calls for information and perhaps vendors' interests in setting up shop on the premises would be included.

It goes without saying that a project of this sort will involve dozens of people, perhaps as many lenders and the risks can be huge. But the pay-offs can also be equally huge. A person attempting to get money to build a hotel will have to find sources for short term money and then have the ability to produce enough revenue to generate confidence for a loan that is long term. Making the whole thing work is a major accomplishment and is not for the faint of heart. But the payoff for such a project can be many years of financial security for the developer.