SBA 7(a) Hotel Feasibility Study in Michigan

Smaller hotel loans than the national norm

Michigan's lodging record under the program covers 247 approvals across FY2017 to FY2026, worth $509.2 million in gross dollars. At $1.8 million the median loan is 0.83x the median hotel loan nationwide, below the norm, and the central half of loans runs $851,250 to $3.1 million. The state ranks 13th for the program by count, and hotels are eighth of 39 on Michigan's list of classes. Franchise flags are on 60.7% of loans.

Outcomes

The cancelled share of Michigan approvals through FY2024 is 7.5% at the least, and the ceiling prints the same 7.5% once undisbursed loans are added. Of the 130 loans funded by FY2021, 2.3% are charged off to date and 0.77% by the five-year mark. These are floors, and a lodging cycle can turn quickly.

Lenders and counties

Shoreham Bank holds 45 loans worth $130.2 million. GBank holds 22 worth $74.7 million, Nicolet National Bank 13 worth $14.3 million, and Celtic Bank Corporation 13 worth $14.1 million. Shoreham's total is the largest by far, a feature that any buyer comparing lenders should keep in view. SBA reports the holder of each loan today, nothing more. Wayne County has 25 loans, Oakland 20, Calhoun 12, and Bay and Cheboygan 11 each, so lending reaches the northern part of the state, where travel is seasonal. Approvals fell to 16 in FY2023 and have since recovered to 26.

One code for every lodging type

One industry code spans hotels and motels, which hides service level: a loan to a roadside motel is indistinguishable from one to a flagged hotel.

What a Michigan hotel study must test

Under the 7(a) guarantee, a study should say whether the money buys a property, converts one, or pays for a brand's required renovation. Demand generators vary widely across the state: automotive and business travel around Detroit, universities, medical centres, and leisure traffic in resort areas where seasonality is strong. Occupancy and average rate must be tested against rooms already open or coming, month by month. Brand improvement plans and franchise fees must appear in cost and cash flow. Run the loan payment against a softer occupancy case, because the loan is measured in millions. Since hotels trade as operating businesses, separate the building's value from the operation's.