SBA 7(a) Hotel Feasibility Study in Tennessee

Flagged hotels and a steep recovery

Tennessee's 7(a) hotel and motel loans are overwhelmingly branded: 81.2% of the 138 approvals carry a franchise. Together they total $358.7 million across FY2017 to FY2026, and a median of $2.5 million runs 1.12x the national 7(a) median for lodging. The middle half of loans spans $1.6 million to $3.6 million, a narrow band that points to a consistent product, the sort of limited-service or select-service property a brand will permit. Lodging holds fourth place among Tennessee's 39 classes, while the state is 24th among states by count, so Tennessee leans on hotels more than it leads the nation in them.

A three-loan start and a rebuilt pipeline

The annual series is unusual. FY2017 shows only 3 loans and $5.5 million, FY2021 jumps to 24 loans and $47.7 million, and FY2026 stands at 16 loans and $57.4 million, the largest dollar year of the three despite fewer loans. Anyone using the full-period total should therefore know it hides a market that was close to dormant in the first year and now supports bigger tickets. County counts show Shelby with 22 loans, Hamilton with 15, Sevier with 10, Knox with 9 and Madison with 7, then Sullivan and Washington with 6 each, Davidson with 5, and Anderson and Bradley with 4 each. The Smoky Mountain county of Sevier and the Memphis county of Shelby sit in one table but serve very different travelers.

Holders and outcome floors

The holders SBA names are GBank with 15 loans and $46.2 million, Peoples Bank with 10 and $31.3 million, Celtic Bank Corporation with 9 and $15.1 million, Farmers State Bank of Alto Pass, Illinois with 8 and $27.0 million, and Shoreham Bank with 6 and $22.2 million. An out-of-state bank in this list shows that Tennessee sponsors may be served by lenders from elsewhere. Cancellation after approval is floored at 11.9%, with the same figure as the ceiling. Of 64 early loans that funded, at least 1.6% have already been written off, though nothing registers on a five-year clock (0.00%). Treat both as minimums rather than a finished record.

Testing a Tennessee lodging project

A study here has to establish whose demand the hotel will actually capture. It should identify the demand generators near the site, the existing rooms competing for them, and the occupancy and average rate the project needs to cover debt service with a margin. Cost needs to be compared with a ticket around $2.5 million, and the brand's required improvements added before the budget is called complete. With 81.2% of loans flagged, the franchise relationship matters as much as the property, but a market study cannot judge it. SBA files all hotels and motels under one code, so limited-service and full-service projects are not separated in these figures, and an appraiser will value the property as an operating business.