Hotel renovations can significantly increase property value, occupancy rates, and guest satisfaction—but they require the right financing strategy. Whether you’re planning a full renovation or targeted upgrades, choosing the right loan can impact your long-term profitability. In this guide, we break down the most common hotel renovation loan options and how to choose the best one for your project.

Updating hotels is essential for keeping up with or beating out the competition. Your improved curb appeal could be the deciding factor for potential guests on the road who are choosing where to stay for the night. Continue reading to learn about your loan options for renovating then check out our blog: 5 Reasons to Renovate to read why now is a great time to renovate.

Whether it’s a complete renovation or just repairs, hotel updates can be costly but there are resources out there that can help hoteliers such as yourself get the capital you need to improve your property.

Below are the most common hotel loan and financing options available to hotel owners who are looking to renovate or repair their hotel. The type of loan you may need is typically dependent on 3 main factors: your renovation/repair needs, how much the project will cost & your experience level as an owner/management. Keep in mind you may also need to provide the loan provider with a description of how funds from the loan will be distributed to the renovation project.

In this article, we will be discussing the most common loan & financing options for hotel renovations & repairs to help you determine which one is best for you.

• For Renovations at Established Hotels: Conventional Bank Loans
• For Renovations at Non-Franchise Hotels & for First Time Owners: SBA 7(a) Loans
• For Large Renovations between $5-$20 million & Experienced Hotel Owners: SBA 504 Loans
• For Small Renovations or Repairs between $10,000 & $1 million: Business Line of Credit
• For Experienced Hotel Owners of Small-Large Hotels who need at least $2 million: CMBS Loans
• Best for Hotel Owners Looking to Finance PIPs: Mezzanine Debt Financing

Types of Hotel Renovation Loans:

Conventional Bank Loans:

Conventional Bank Loans are best for established hotel owners. These loans are provided by banks or lending institutions.

This type of loan while usually the cheapest out of your renovation financing options, can also be one of the most difficult to obtain.

Borrowers looking into conventional bank loans should have a strong credit history & relationship with a bank.

SBA 7(a) Loans:

SBA 7(a) Loans are most beneficial for first-time hotel/motel owners who may not have a perfect credit history or are less experienced.

Also, if you are not planning on owning your hotel long-term or have less than 20% down, an SBA 7(a) Loan can help you renovate your property & increase your ROI with loans usually up to $5 million.

To qualify for this type of loan you will typically need assets to use as collateral, a 650 credit score (or above) & revenues of at least $100,000/year.

SBA 504 Loans:

SBA 504 Loans are ideal for the experienced hotel owners who are in need of a large construction/renovation loan. Compared to other loans, SBA 504 loans are typically the best choice but are also harder to qualify for.

Loan amounts are usually between $5 & $20 million, down payments can be as low as 15% but you may have to have a plan on expanding your business.

To qualify for this type of loan you will typically need a net worth of $15 million (no more than this), an average income of no more than $5 million after taxes in the past 2 years before applying, qualify for the SBA’s standards for small business, operate for profit & meet owner-occupancy requirements.

Business Line of Credit:

Typically available in amounts of $10,000-$1 million, a Business Line of Credit is best for hotel owners in need of smaller repairs & renovations to their property.

To qualify for a Business Line of Credit you usually will need: an annual revenue of over $180,000, a minimum credit score of 650 & at least one year of experience owning a hotel.

CMBS Loan:

CMBS loans are great for the experienced hotel owner who is in need of a minimum of $2 million in financing for their project. One reason hotel owners choose these loans is because they have no specific cash-out restrictions.

Most hotels are eligible for this type of financing including: full service, boutique, limited service, branded (flagged) & unbranded. To qualify, you should have experienced management & your property should have a strong financial performance history.

Mezzanine Debt Financing:

If you’ve received a PIP for your hotel, Mezzanine Debt Financing may be the best way to fund your renovation.

This type of loan is a combination of both debt and equity financing. With this combination, hotel owners receive a loan as well as money in exchange for shares of your company. Mezzanine Loans use liens on the hotel management company as collateral and can be obtained in amounts between $1-10 million.