SBA 504 Hotel Feasibility Study in North Carolina

North Carolina: hotels lead the state, and the loans are large

Hotels and motels are the top asset class in North Carolina's SBA record, ranked 1 of 39, although the state is only 13th among states by the number of 504 hotel loans. SBA approved 78 loans from FY2017 to FY2026, worth $205.8 million. The loans are big: a median of $2.5 million, 1.22x what hotel borrowers get nationally under 504, and the middle of the pool spans $1.4 million to $3.6 million. Franchised properties account for 55.1% of the loans, so a majority of financed hotels carry a brand. North Carolina's loss rate for the early funded group is not printed, since the group was small; its absence is not a zero.

Development companies and counties

Business Expansion Funding Corporation services 34 of the loans, totalling $93.1 million. 504 Capital Corporation accounts for 20 at $36.1 million, and Carolina Business Capital, Inc. for 17 at $49.8 million, a large average. In this program the development company arranges the second loan beside a bank's first loan, and SBA's rows record who holds each note now. Mecklenburg County has 17 loans, Wake 7, Dare 6 and Buncombe 5. Annual dollars range from $2.5 million in FY2021 to $37.6 million in FY2025.

Cancellation

Cancellation reaches at least 9.4% across FY2017 through FY2024 and up to 14.1% with undisbursed loans added.

Testing a North Carolina hotel

A single code covers every hotel and motel, so select-service and full-service projects blur together here; the study must define the product. Since most borrowers carry a flag, begin with the brand: the application fee, royalties, reservation and marketing charges, and the property-improvement plan the franchisor will require. Then test demand in the real market. Different hotel types rely on different seasons and travellers, so rate and occupancy should be projected month by month against comparable hotels. Costs must include furniture, fixtures and equipment alongside construction. The payment should be covered through the weakest quarter and again after a competitor opens. The appraisal values a going lodging business, so the study should show how its revenue per available room compares with local hotels. A loan beyond the central range should be justified by room count and product quality.