SBA 7(a) Hotel Feasibility Study in New Mexico

The top class in New Mexico, at a lower price point

Hotels and motels rank first among New Mexico's 39 asset classes in SBA 7(a) activity. The state logged 140 hotel loans over FY2017 to FY2026, totalling $306.7 million, though its position among states is only 23 by count. The median of $1.8 million is 0.83x the national 7(a) figure for hotels, so the typical New Mexico project is smaller than the typical American one, and half of the loans fall between $957,250 and $3.3 million.

Western Commerce Bank holds 37 of these loans, worth $48.2 million, far ahead of every other holder in SBA's files. Open Bank follows with 12 loans and $31.7 million, US Metro Bank with 9 and $24.7 million, Shoreham Bank with 7 and $21.3 million, and Enterprise Bank & Trust with 7 and $12.0 million. Concentration like this describes who holds the paper, not how it was underwritten. Franchise-affiliated borrowers account for 68.6% of the loans. By county, Bernalillo has 27, San Juan 12, Lea 9, Guadalupe 8, and Dona Ana, Lincoln, McKinley and Taos 7 each.

What the coding hides

Motels and hotels fall under a single industry code in SBA's files, which blurs the line between lean limited-service lodging and full-service lodging. A study has to say which kind of property is being financed and not lean on the blended record.

Cancellation after approval reached 5.2% at the least among New Mexico hotel loans approved through FY2024, with an identical ceiling. None of the 72 loans in the early New Mexico hotel cohort shows a charge-off in SBA's files, at 0.00% to date and within five years. That is an absence of recorded losses so far, not proof that none will occur, because later vintages have had less time.

Underwriting tests for a New Mexico lodging loan

The study should identify where demand at the site comes from: interstate traffic, local business, leisure stays, government and military travel. Average rate and occupancy should come from the competing hotels near the site, with the brand's standards and fees priced in. At loans commonly near $1.8 million, the budget per room, the reserve to replace furnishings, and coverage of the payment under a slow season belong in the model, and the appraisal should set income value beside what the building would cost to replace.