SBA 7(a) Hotel Feasibility Study in Washington

Large, uncancelled, and charge-off free so far

Hotel and motel lending in Washington under SBA 7(a) runs to a different scale from the other cells on this site: 298 loans in the FY2017 to FY2026 files, $779.9 million gross, and a median loan of $2.4 million, 1.10x the figure for hotels nationwide. Half of all loans lie between $1.3 million and $4.1 million. What distinguishes the cell is cancellation: the cancellation floor is 15.3% for the FY2017 to FY2024 group, and counting undisbursed loans changes nothing, leaving the ceiling at 15.3%. Washington is 9 among states for the program and class, hotels are 5 of 39 in the state, and franchise brands hold 41.9%.

Lenders and counties

Bank of Hope holds 51 loans worth $154.6 million, Open Bank 32 worth $87.3 million, Mountain Pacific Bank 26 worth $73.9 million, PCB Bank 21 worth $64.6 million and US Metro Bank 20 worth $64.3 million. These dollar totals are large because each hotel loan is large. The page prints SBA's holder field, not any view of how banks assess hotels. King County has 41 loans, Pierce 34, Snohomish 33 and Grays Harbor 26, with Spokane at 16, Whatcom at 15, Chelan and Yakima at 14, and Clallam and Skagit at 11. Grays Harbor's place beside the Seattle area counties points to coastal and leisure properties as well as city hotels. Annual approvals fell from 56 in FY2017 to 14 in FY2026.

Charge-offs and the code

Across the 163 loans that funded between FY2017 and FY2021, no charge-off rate above 0.00% shows so far, either to date or at five years. That is a minimum, not a guarantee, since open loans may fail later. Because hotels and motels are filed under one code, limited-service and full-service properties are blended in these counts.

What a Washington hotel study has to test

A hotel is an operating business in a building, so the study must test both. Demand comes from the market the property draws on: business travel, leisure and events, with occupancy and average rate for competing hotels in the submarket, and the supply under construction. Seasonality is strong in much of Washington, and the study should show monthly occupancy, not a yearly average. Franchise affiliation, with its fees and brand standards, belongs in the cost model, along with any required renovation. At a median of $2.4 million, cost lines should separate land, building, furniture and fixtures and working capital. Coverage has to hold at a downside occupancy, and the appraisal will rely on income, so the study should reconcile the two. The study should also list the steps that could delay a closing.