SBA 504 Hotel Feasibility Study in California

California is first among states for SBA 504 hotel and motel loans, while hotels and motels sit 4 of 39 within California. The program approved 355 loans for $1.01 billion in FY2017 to FY2026. Because 504 is a real estate and fixed-asset program, this view shows property financing, not working capital. The $2.6 million median is 1.25x the national 504 mark for the class, with the middle half between $1.4 million and $4.6 million. Franchise-flagged loans are 56.3%, so a majority, though not the near-universal share seen under 7(a) in some states.

The lenders are development companies

The 504 table names certified development companies, not banks. The Mortgage Capital Development Corporation tops it by far, 136 loans and $377.6 million. CDC Small Business Finance Corp. has 41 worth $116.5 million, Business Finance Capital 37 worth $104.5 million, Bay Area Employment Development Company 24 worth $94.1 million, and Advantage Certified Development Corporation 23 worth $79.2 million. These are SBA records, not a view of any firm's standards. Geography is inland as much as coastal: RIVERSIDE County has 37 loans, SAN BERNARDINO 23, LOS ANGELES 19, SACRAMENTO and SAN DIEGO 15 each.

Cancellation is the striking measure

Of California's FY2017 to FY2024 hotel approvals, 14.9% at least were cancelled, and counting the not-yet-funded ones raises that to 21.1%, a wide gap that suggests many projects were still waiting to fund. Charge-offs are low: the FY2017 to FY2021 cohort has 128 funded loans, of which 0.78% at the least are charged off and 0.00% at the five-year mark. Annual volume ranged from 22 loans in FY2020 to 51 loans and $130.2 million in FY2017, and FY2025 saw 43 loans and $135.7 million.

What a California hotel study must test

The code covers hotels and motels without separating limited-service from full-service, so the study must state its product and benchmark it correctly. Demand comes first: room nights by segment, the airport, convention, tourism and highway generators near the site, and supply already in the pipeline. Under 504 the project is typically a purchase or construction, so build cost, entitlement time and carrying cost during construction need explicit lines. Brand fees and required renovations affect cash flow, and the payment should still be covered when occupancy trails the market. The appraisal will rest on stabilized income. SBA, not this page, states the program's terms.