SBA 504 Hotel Feasibility Study in Michigan

Two sponsors, a franchise majority, and a missing rate

Michigan's SBA 504 hotel book rests on two sponsoring companies. Michigan Certified Development Corporation handled 43 of the 71 loans approved between FY2017 and FY2026 and $98.1 million of the $134.3 million total; Great Lakes Commercial Finance handled 23 loans and $33.2 million. SBA's sponsor records are the source, and the figures say nothing of how either company decides. Franchise flags mark 69.0% of loans. Lodging holds second place of 39 among Michigan's financed classes, while the state ranks 15 among states for the program, a gap suggesting that Michigan matters more to hotels than hotels matter to the national 504 book.

A smaller ticket than the national hotel

At $1.5 million the median loan is 0.73x of the nationwide 504 hotel median, with the middle of the distribution running from $951,500 to $2.7 million. Wayne County records 10 loans, Oakland 6, Grand Traverse and Kent 5 each, Macomb 4, and Berrien and Kalamazoo 3 each, so lending reaches both the Detroit area and the western and northern parts of the state.

Cancellation, and why there is no charge-off rate

Cancellations reached at least 9.8% of approvals from FY2017 to FY2024, but the ceiling that adds loans still undisbursed is 18.0%, nearly double. The gap says many approved projects were not yet paid out, and a borrower or lender should plan for a closing timeline that can stretch. We print no charge-off rate here: the early-funded group was too small to support one, so it should be taken as neither clean nor zero.

Testing a Michigan lodging request

A study has to define the market before it forecasts anything. A Detroit-area property relies on business, airport and event demand; a Grand Traverse property on seasonal leisure; a highway property on through traffic. Each calls for counts of competing rooms, a year of monthly occupancy and rate, and a stress case for the weakest season, with debt service covered in it. Because most loans are franchised, brand fees, property improvement plans and furniture reserves belong in the budget. Since the 504 loan rests on property, the building and land need an appraisal that holds up, and the project's cost per room should be compared with what similar hotels cost. The lodging code is a single bucket, so limited-service and full-service plans cannot be separated in these figures.