Hotel Acquisition Loans: How to Finance Buying a Hotel

The main ways to finance a hotel purchase are an SBA 7(a) loan, an SBA 504 loan, a conventional bank or commercial mortgage, and, for hotels in rural areas, a USDA Business and Industry guaranteed loan. Seller financing can fill part of the gap. Which one fits depends on the price, whether the hotel carries a brand flag, how much renovation the brand will require after the sale, and where the property is.

This page is for owner-operators buying an existing hotel. It sits under our hotel business loans guide, which covers financing for hotels you already own. Below: the main loan programs and their published limits, the SBA rule change that starts on October 1, 2026, what lenders review in a hotel deal, and the costs buyers tend to underestimate.

Ways to finance a hotel purchase

Figures checked on September 21, 2026, against the program pages listed under Sources.

Interest rates depend on the lender, the program, the property and your finances, so we have not listed a rate range. When you compare offers, use the APR (the yearly cost of the loan including interest and most fees) and ask each lender for its fees in writing.

SBA 7(a) loans for buying a hotel

The SBA’s 7(a) program goes up to $5 million. Its eligible uses include “acquiring, refinancing, or improving real estate and buildings,” “purchasing furniture, fixtures, and supplies,” working capital and “changes of ownership (complete or partial).” That combination matters for a hotel, because the purchase usually covers the real estate, the operating business and the furniture, fixtures and equipment (FF&E) in one deal.

SBA’s terms and eligibility page sets maximum maturities of 25 years for real estate and 10 years for equipment or working capital. Since July 4, 2026, borrowers can combine 7(a) and 504 loans for up to $10 million in SBA-backed financing.

Branded hotels. Brands that meet the FTC definition of a franchise “must be in the directory to obtain SBA financing,” according to the SBA Franchise Directory. Check the flag is listed before you spend money on due diligence. Our franchise business loan guide covers franchise financing more broadly.

Active, not passive. SBA rules exclude “passive businesses owned by developers and landlords that do not actively use or occupy the assets” (13 CFR 120.110). A buyer who will run the hotel is in a different position from an investor who plans to lease it to an operator, so tell the lender how the hotel will be managed.

SBA acquisition rules change on October 1, 2026

The SBA published SOP 50 10 8.1, its updated rulebook for 7(a) and 504 lenders, on August 14, 2026. It takes effect on October 1, 2026.

Because a hotel purchase can take months to close, your deal may be underwritten under one version and funded under another. Ask your lender in writing which version applies to your loan and what equity injection it will require, and ask again if the closing date moves.

SBA 504 loans for the building

The 504 program finances “the purchase, construction or renovation of existing buildings or land” and long-term machinery with at least 10 years of remaining useful life, up to $5.5 million. “Certified Development Companies (CDCs) are authorized by SBA to originate in collaboration with a senior lender a 504 loan,” so a 504 deal involves both a CDC and a senior lender such as a bank. Terms are 10, 20 or 25 years, and the rate is “pegged to an increment above the current market rate for 10-year U.S. Treasury issues.”

504 funds cannot be used for “working capital or inventory,” so a hotel buyer using 504 for the property often needs a separate loan or cash for goodwill, opening working capital and renovation reserves. Our 7(a) vs 504 guide compares the two programs side by side.

USDA B&I loans for rural hotels

USDA Rural Development’s Business and Industry Guaranteed Loan program guarantees lender loans in “rural areas not in a city or town with a population of more than 50,000 inhabitants.” Eligible uses include “business and industrial acquisitions when the loan will maintain business operations and create or save jobs” and the purchase of land and buildings for commercial properties.

• Guarantee. 85% for applications under $5,000,000 and 80% at $5,000,000 or more. The guarantee protects the lender, not you.
• Term. “The loan term will not exceed 40 years.”
• Rates. “Interest rates are negotiated between the lender and borrower” and can be fixed or variable.
• Fees. An initial guarantee fee of 3% of the guaranteed amount, and an annual retention fee of 0.55% of the guaranteed portion of the outstanding balance.
• How to apply. USDA tells borrowers to “inquire about the program with their lender.”

What lenders review in a hotel acquisition

• The hotel’s own numbers. The SBA’s guide to buying a business lists financial statements, tax returns, contracts and leases among the documents to review. Lenders size the loan on the cash flow the hotel produces; the SBA describes the cash flow method as the one “typically used to determine how much of a loan the business’ cash flow can support.”
• The franchise agreement and any improvement plan. HSMAI, a hospitality industry association, defines a property improvement plan (PIP) as a brand requirement that owners renovate to current standards, and says PIPs are “generally required when a hotel joins a brand system, when a branded hotel is sold, or when a franchise or membership agreement comes up for renewal” (HSMAI Academy). Get the PIP before you finalize the loan amount.
• The property. The SBA guide flags licenses and permits, zoning and environmental concerns when real property is part of the purchase. Expect an appraisal and, usually, an environmental review.
• Your experience. Lenders look for hotel operating or management experience, or a plan to hire it.
• Your equity and credit. SBA borrowers must “have reasonable owner equity to invest” and be creditworthy. Most lenders also ask owners to sign a personal guarantee.

If you are short on cash for the down payment, our guide to financing an acquisition without using personal savings covers seller notes and other ways buyers fill the gap.

Costs beyond the purchase price

• PIP renovations. Rooms, lobby, signage and systems the brand requires after the sale. Build the cost into the loan request rather than planning to fund it later.
• FF&E replacement. Furniture and fixtures wear out on a cycle. 7(a) can fund them; 504 generally cannot unless they qualify as long-life equipment.
• Working capital. Payroll, supplies and a cash cushion for the first slow season.
• Loan and guarantee fees. SBA and USDA guarantees carry fees, and banks charge their own. Ask for a full list of closing costs.
• Third-party reports. Appraisal, environmental review, property condition report and legal fees.

Pitfalls to watch

• Pricing the hotel before seeing the PIP. A large renovation requirement changes what the hotel is worth to you and how much you need to borrow.
• Assuming the brand is SBA-eligible. Check the SBA Franchise Directory first.
• Using trailing numbers from one strong year. Lenders look at several years of results. Seasonal swings show up in monthly statements.
• Letting the SBA rule change surprise you. Confirm which SOP version applies if your deal will get its loan number close to October 1, 2026.
• Leaving no working capital. Putting every dollar into the down payment and renovations leaves nothing for a slow quarter.

Hotel acquisition loan FAQs

Can I use an SBA loan to buy a hotel?

Yes, if you will operate the hotel and the business meets SBA eligibility rules. The 7(a) program covers real estate, changes of ownership, furniture and fixtures, and working capital up to $5 million. For a branded hotel, the brand must be in the SBA Franchise Directory.

What if the hotel costs more than $5 million?

A single 504 loan goes up to $5.5 million, and since July 4, 2026 borrowers can combine 7(a) and 504 loans for up to $10 million in SBA-backed financing. Above that, buyers typically use a conventional bank or commercial mortgage, sometimes with a seller note.

How much down payment do I need to buy a hotel?

It depends on the program, the lender and the deal. For SBA loans, the equity rules for changes of ownership are set in the SBA’s rulebook, and a new version takes effect on October 1, 2026. Ask the lender for its requirement in writing for your specific deal.

Is there a loan program for hotels in small towns?

The USDA Business and Industry program guarantees lender loans for businesses in areas outside cities of more than 50,000 people, with terms up to 40 years. You apply through a participating lender, not directly with USDA.

Next step

If you have a hotel under letter of intent, gather the seller’s last three years of financial statements, the franchise agreement and any PIP, and your own personal financial statement. Our hotel business loans page explains how SMB Compass helps you compare offers from the lenders we work with. Buying a smaller independent property? See motel loans and RV park and campground loans.

Sources

• SBA: 7(a) loans
• SBA: 7(a) terms, conditions and eligibility
• SBA: Small businesses now eligible for $10 million in SBA financing
• SBA: Franchise Directory
• eCFR: 13 CFR 120.110, ineligible businesses
• SBA Information Notice 5000-880695: Issuance of SOP 50 10 8.1
• SBA: 504 loans
• USDA Rural Development: Business and Industry Guaranteed Loan
• SBA: Buy an existing business or franchise
• HSMAI Academy: Property Improvement Plan (PIP)

About this page. Written by Ezra Cabrera, Content Team Lead at SMB Compass. Figures were checked against the primary sources listed above on September 21, 2026; lenders change their terms, so confirm current terms before you apply, and let us know if you spot a figure that has changed. SMB Compass is a business financing broker: we don’t lend our own money, and we are paid by the lenders we place loans with. This page is general information, not financial, legal or tax advice.