SBA 7(a) Hotel Feasibility Study in California

California hotels under 7(a): few approvals fall away

California ranks 2 among states for 7(a) hotel and motel loans, with 825 approvals from FY2017 to FY2026 totalling $2.05 billion, and the class stands 10 of 39 inside the state. What distinguishes the cell is its cancellation record: cancellations took 5.9% of approvals made through FY2024 as a floor, and the identical 5.9% results once undisbursed loans are counted, so almost nothing sits in limbo. A floor that low suggests approved California hotel loans mostly reach closing.

Size, franchising and holders

These are large loans. The median is $2.3 million, 1.04x the national 7(a) benchmark, and a mid-range ticket runs $988,000 to $4.0 million. Franchised properties account for 41.0% of loans. Pinnacle Bank holds 122, worth $320.6 million, with US Metro Bank at 70 worth $197.9 million, Open Bank at 62 worth $143.5 million, West Coast Community Bank at 44 worth $96.9 million and Summit State Bank at 32 worth $111.7 million. These holder entries are SBA's bookkeeping alone. Los Angeles County has 113 loans, San Bernardino 83, Riverside 63, Kern 48, San Diego 45, Orange 42, El Dorado 32, Sacramento 29, Monterey 28 and Fresno 19.

Charge-offs

The funded cohort from FY2017 to FY2021 holds 546 loans, and the charge-off floor is 0.18% to date and 0.18% inside five years. Floors this low still deserve caution: hotel loans can fail late, so a lender should not read the figures as a ceiling.

What a California hotel study must test

Project occupancy, the daily rate and revenue per available room for the specific market and brand tier, then test them against the supply open or under construction nearby. Account for franchise fees and brand standards, property improvement plans, and the seasonal swings that drive debt service. Compare cost with a ticket near $2.3 million, and let any larger project show where the rest comes from. Include a downturn case for coverage. The program is a guaranteed private loan usable for acquisition and improvement, and a valuer will treat the hotel as a going concern under an income approach.

Motels and hotels are coded together, so these figures blend limited-service and full-service properties.