Hotel bridge loans

What lenders look at

RevPAR, ADR and occupancy

Lenders read trailing performance through STR reports and the property’s own P&L, comparing RevPAR, ADR and occupancy against the competitive set to judge whether the business plan is realistic.

Flag, franchise term and comfort letter

For branded hotels, the remaining franchise agreement term matters, and most lenders want a comfort letter from the franchisor confirming the lender can step in and keep the flag if it takes the property back.

PIP obligations

A property improvement plan required by the brand can be a large, mandatory capital cost. Lenders look at its scope, deadline and cost and usually want it funded through a holdback or renovation budget rather than left to cash flow.

Management company

Hotels are operating businesses, so the manager’s track record, the management agreement and whether it is subordinate to the loan all affect how a lender views risk.

Seasonality and demand drivers

Lenders look at monthly revenue patterns, demand generators such as airports, hospitals, interstates or tourism, and new supply nearby. Seasonal properties often need an interest or seasonality reserve.

FF&E and deferred maintenance

Furniture, fixtures and equipment age quickly. A property condition report showing deferred items or tired FF&E will push a lender toward a larger capex holdback.

How leverage works

Hotels are business-dependent assets, so asset-based bridge lenders usually lend at lower leverage than they would on stabilized multifamily, often in the 50–65% of as-is value range for straightforward deals. When there is a PIP or renovation budget, many lenders size on loan-to-cost and fund the improvements through a holdback released as work is completed. Appraisals for hotels typically separate the going-concern value (real estate plus business, FF&E and flag) from the real estate alone, and conservative lenders lean on the lower real estate number. A strong flag with a long remaining franchise term generally supports better terms than an independent or off-brand property.

Use the commercial bridge loan sizer to see whether LTV or LTC decides your loan. The deal form asks for keys, occupancy today and current NOI, so lenders see the numbers they size on.

Documents lenders ask for

• Trailing 12-month and year-to-date P&L, plus prior two years
• STR reports (trailing and competitive set)
• Franchise agreement and any amendments
• Property improvement plan (PIP) and contractor bids
• Management agreement and manager resume
• Rent roll or room mix summary and any long-term group or lease agreements
• Purchase contract or payoff letter for the existing loan
• Property condition report and FF&E schedule
• Entity documents and sponsor real estate schedule
• Insurance declarations and recent tax bills

How fast it closes

Straightforward hotel bridge deals can close in roughly 7–30 days with a lender that has its own capital. The pace is usually set by the hotel appraisal, which takes longer than a typical commercial appraisal because it values the business, plus the franchisor comfort letter, which some brands take weeks to issue. Flag changes, a new PIP or a change in management company all add time, so start the brand conversations early.

Common bridge scenarios

Acquisition with a PIP

A buyer acquires a branded hotel that requires a PIP at transfer. The bridge loan funds the purchase and a renovation holdback, and the sponsor refinances once the work is done and performance recovers.

Maturing loan payoff

An owner’s CMBS or bank loan is maturing and performance has not fully recovered. A bridge loan pays off the maturing debt and buys time to stabilize before a permanent refinance.

Flag change or repositioning

An owner converts an independent motel to a brand, or moves a hotel from one flag to another, and needs capital to cover the conversion work while revenue ramps.

Recapitalization or cash-out

An owner with significant equity in a stabilized hotel takes cash out to fund another acquisition or buy out a partner, using a bridge loan until a longer-term loan is in place.

Typical exit

Hotel bridge loans are usually repaid with an SBA 504 or 7(a) loan for owner-operators, a bank or CMBS loan once performance stabilizes, or a sale of the property.