SBA 7(a) loans for hotels and motels: rules for 2026

SBA 7(a) is the loan most owner-operators use to buy a hotel or motel. Under SOP 50 10 8.1, in force since October 1, 2026, it lends up to $5,000,000, needs 10% of the total project cost as equity on a purchase, caps the variable rate at prime plus 3 points (10.00% with prime at 7.00%) on loans over $350,000, and requires the hotel’s cash flow to cover the payment 1.25 times.

Motel Loans is not affiliated with the U.S. Small Business Administration. The rules below are from SBA's own documents, cited at the end. Your lender applies them to your deal.

The numbers that apply today

Rule	7(a) for a hotel purchase	Source
Maximum loan	$5,000,000 ($3,750,000 maximum guaranty)	SOP 50 10 8.1; 13 CFR 120.151
Guaranty	75% on loans over $150,000	SOP 50 10 8.1, App. 16
Equity	10% of total project cost, cannot be waived	SOP 50 10 8.1, App. 15
Debt service coverage	1.25x for an initial acquisition	SOP 50 10 8.1, App. 15
Maximum variable rate	Prime + 3% over $350,000 (10.00% at 7.00% prime)	SOP 50 10 8.1, App. 18; Fed H.15
Maximum fixed rate	12.00% over $250,000 (October 2026)	SBA maximum fixed-rate table
Term	25 years on real estate; 10 years on FF&E, goodwill and working capital	SOP 50 10 8.1, App. 15 and 17
Upfront guaranty fee (FY2027)	3.5% of the guaranteed part up to $1M, 3.75% above, for loans over $700,000	SBA Information Notice 5000-881797
Ownership	100% U.S. citizens or U.S. nationals living in the U.S.	SOP 50 10 8.1; Policy Notice 5000-876441

Prime was 7.00% on October 22, 2026, where it has been since September 17, 2026, according to the Federal Reserve’s H.15 release. When prime moves, a variable-rate 7(a) loan moves with it.

A worked example

Say you’re buying a 70-room motel for $3,200,000. The brand’s PIP is $400,000 and closing costs and working capital come to $100,000. The project cost is $3,700,000.

• Equity: 10% of $3,700,000 is $370,000. If the seller agrees to a full-standby note, it can cover up to half of that, $185,000.
• Loan: $3,330,000. SBA guarantees 75%, or $2,497,500.
• Upfront guaranty fee: 3.5% of the first $1,000,000 guaranteed plus 3.75% of the other $1,497,500 = $91,156. It can be financed into the loan, which makes the loan that much larger; the payment below leaves it out to keep the arithmetic simple.
• Payment: at 10.00% over 25 years, $30,260 a month or $363,117 a year.
• Cash flow needed: at 1.25x, the motel has to show NOI of about $453,900 to support that payment.

Run the same deal with your own numbers in the hotel loan calculator.

The term on a hotel purchase is blended

On a change of ownership, SBA lets only the real estate portion run past 10 years, up to 25. Furniture, fixtures and equipment, goodwill, soft costs and working capital each get 10 years, and the lender works out a weighted maturity from how the money is used before equity is applied. The exception: because SBA treats a hotel as a special-purpose property, the lender can set a full 25-year term when real estate is 85% or more of the total project cost.

A big PIP or a lot of goodwill pulls the term down and the payment up. In the example, if the PIP is mostly FF&E, the blended term could come in well under 25 years. Ask your lender for the maturity calculation early.

Who is eligible

The hotel has to be an active business. SBA treats a hotel or motel as eligible only if more than 50% of the prior year’s revenue came from guests staying 30 days or less. A property that has drifted into long-term rentals can fail this test. A new build has to show it in its projections.

Every owner must be a U.S. citizen or U.S. national living in the U.S. This is new. Since March 1, 2026, lawful permanent residents (green-card holders) can’t own any percentage of an SBA borrower, and the old allowance for small foreign ownership is gone. SBA looks back six months, and an ineligible owner must fully divest before SBA issues the loan number. Naturalized citizens are eligible with no extra conditions. If one of your partners is not a citizen, talk to a lender before you sign a purchase agreement that depends on SBA financing.

The brand must be on SBA’s Franchise Directory. The directory dated October 15, 2026 lists the large economy and midscale flags, including Hampton, Holiday Inn Express, Comfort, Days Inn, Super 8, Motel 6, Red Roof and Best Western. You are not eligible if the hotel’s management company is the franchisor or affiliated with it. See franchise costs by brand for what each brand charges.

Anyone who owns 20% or more gives an unlimited personal guaranty, and spouses’ shares are combined.

Equity: what counts

Where equity plans usually break is the seller note. It counts toward the 10% only if it is subordinated and on full standby for the life of the SBA loan, meaning the seller gets no principal or interest until the bank is paid off, and seller financing plus a few other limited sources can cover no more than half of the injection. Plenty of sellers won’t wait 25 years, so price that in early.

The rest has to be documented cash or other eligible equity, measured against total project cost, which includes the PIP, closing costs and working capital. SBA also bans seller earnouts, and the seller can stay on as a paid consultant for no more than 24 months.

If you pay more than the business is worth on SBA’s valuation, the difference has to come from equity.

What the lender will want

• Three years of the hotel’s tax returns and financial statements, checked against IRS transcripts, plus the latest interim statements and the same period last year.
• Your personal financial statement and tax returns, and a schedule of all your business debt.
• The purchase agreement, the franchise agreement or application, and the PIP.
• An appraisal and, usually, an environmental report.
• Your hotel experience, or who will run the property day to day. If a management company will run it, the lender checks that you keep real control over the budget, bank accounts and staff.

SBA 7(a) or SBA 504?

7(a) can carry everything in one loan, including goodwill and working capital, with 10% down. 504 needs 15% down on a hotel, finances only fixed assets such as the building and equipment (not goodwill or working capital), and involves a bank and a certified development company, but the CDC part carries a fixed rate that was 6.97% for 25 years in October 2026 pricing. Read SBA 504 for hotels.

About referral fees

SBA lenders may not charge you broker, referral or origination fees. If a lender pays anyone, including Janover Capital (which runs this site), a fee for referring your loan, SBA requires it to be disclosed on SBA Form 159, which you, the lender and the referral agent all sign. SBA does not require you to use an agent or a referral service. How we get paid.

Sources

• SBA, SOP 50 10 8.1, Lender and Development Company Loan Programs, effective October 1, 2026 (sba.gov, SOP 50 10).
• SBA Policy Notice 5000-876441, “Update to Citizenship and Residency Requirements,” published February 2, 2026, effective March 1, 2026 (PDF on sba.gov); carried into SOP 50 10 8.1, effective October 1, 2026.
• SBA Information Notice 5000-881797, FY2027 7(a) program fees, effective October 1, 2026.
• SBA maximum allowable fixed rates table, October 2026; Federal Reserve H.15 bank prime loan rate.
• SBA Franchise Directory, October 15, 2026; 13 CFR 120.151 and 13 CFR part 103.