SBA 504 Hotel Feasibility Study in Iowa

Hotels are the largest 504 class in Iowa, at 1 of 39, but Iowa ranks only 26th for hotel loans when counted nationally, and its median is 0.60x the nationwide 504 hotel median. The distinction of the cell is its franchise intensity and its scale: 73.7% of the 38 loans carry a brand, and the dollars total $68.3 million for FY2017 to FY2026. The median loan is $1.2 million, with the middle half running from $730,500 to $2.6 million.

Three companies and a shared border lender

Iowa Business Growth Company shows 17 loans and $32.0 million, Siouxland Economic Development Corporation 7 and $13.6 million, and Dakota Business Finance 7 and $10.5 million. These are counts of notes held and are not a rating of any of the three. Counties are spread thinly: Linn 4, and Dickinson, Johnson, Polk, Scott and Woodbury 3 each, then Fayette, Pottawattamie, Union and Warren 2.

The years

Counts were 3, 5, 2 and 2 for FY2017 to FY2020, 5 in FY2021, a high of 7 in FY2022 at $10.1 million, and only 1 in FY2023. Peak dollars arrived in FY2024: 5 loans, $15.0 million. FY2025 followed with 6 and $10.9 million, and FY2026 with 2 and $4.8 million. Hotel loans are large enough that a few of them determine the totals.

Cancellations and the missing loss rate

At least 3.3% of approvals through FY2024 were cancelled, but counting undisbursed loans as cancelled reaches 10.0%, so the floor is low and the ceiling not. A loss rate for Iowa hotel loans is not available, the funded cohort being too small, and nobody should convert the blank into a zero.

Lodging study questions for Iowa

The shared hotel-and-motel code hides the difference between limited and full service, so the report should name the brand and class, then test demand by segment: business travel, events, sports, and leisure near lakes. It should compare rival properties on rate and occupancy, forecast ramp-up, and include the franchisor's fees and required renovations. Test debt service across both loan pieces at an occupancy under the brand's system average, and ask the appraiser to price the building apart from the operating business.