What does this guide cover?

The document that decides your financing terms is not the loan agreement. It is the licence agreement you signed with the brand, and the lender will read it before you do.

Which funding products does this apply to?

Term Loan, SBA Loan, Equipment Financing. Each has its own page listing the funders in this directory that offer it and what each one publishes about its terms.

Is this specific to hospitality?

It is written around how a hospitality business actually generates and collects cash, which is what makes its funding problem different. The mechanics transfer; the arithmetic may not.

The Find Me Funders research desk. Some drafting is AI-assisted, and every page that is says so at the top, including whether a person has checked its claims yet.

How do I know a figure here is right?

Where a page carries the green notice, its claims were checked against the sources listed at the end and a reviewer is named. Where it carries the amber one, nobody has verified it yet and you should confirm anything you plan to act on.

Are the examples real deals?

No. Every worked example is labelled illustrative and exists to show the arithmetic. What any particular lender charges is on that lender's page, where it publishes it.

Why do you never say what a typical rate is?

Because we cannot source it. A market average assembled from lenders who do not publish prices is a guess with a decimal point on it. Where a lender publishes a figure, we show that figure and say where it came from.

Is this financial or legal advice?

No. It is general information about how these products work. Outcomes depend on your contract and your state, and a lawyer or accountant licensed where you are is the person to ask about your situation.

Can I reuse this content?

Quote a paragraph with a link back. Do not republish whole articles.

How a brand agreement shapes the loan on a franchised hotel

Hotel lenders underwrite three things: the real estate, the cash flow and the flag. The third one is the least discussed and often the most decisive, because a franchised hotel without its brand is a different asset with a different value, and every lender knows it.

The licence agreement controls when you must spend money, whether the brand can terminate, what happens on a transfer, and whether the lender can step in and keep the flag flying after a default. Those four provisions set the structure of your loan more than the interest rate negotiation does.

The capital requirement you did not choose

A brand can require a property improvement plan on renewal, on transfer, or on a schedule. The scope is set by the brand, not by you, and the deadline usually is too.

Illustrative only —a 92-room hotel required to complete 1,800,000 of work over 24 months: 19,565 a room. Financed over 10 years at an illustrative 8.5 per cent, the payment is 22,317 a month and 267,809 a year. Spread over 33,580 annual room-nights, the property must produce 7.98 more per available room per night just to cover the new debt service. If 70 per cent of incremental revenue reaches the bottom line, the required uplift in revenue per available room is 11.39. At 68 per cent occupancy, that is a 16.75 increase in average daily rate.

Write that number down before you agree a scope. The question is not whether you can borrow 1,800,000. It is whether the renovated property can hold 16.75 more in rate than the tired one, in your market, against your competitors, who may be doing the same work in the same year.

The four clauses a lender reads first

Term and renewal.A loan amortising over 20 years against a licence with 6 years left is a mismatch. Lenders solve it with a shorter term, a balloon at or before licence expiry, or a covenant requiring renewal by a set date. Check your remaining licence term before you decide what loan term to ask for; the licence, not the building, usually sets the maturity.

Termination rights.Brands can typically terminate for failure to meet quality scores, failure to complete required work, insolvency, or transfer without consent. Each of those is also a default under the loan, because the loan will contain a covenant requiring you to maintain the franchise in good standing. This is how a bad guest-satisfaction quarter becomes a lending problem: two documents, one event, cross-default between them.

Transfer and consent.The brand almost always has consent rights over a change of ownership, and often a right of first refusal. A lender foreclosing is a transfer. If the brand can refuse consent to the lender's buyer, the lender's collateral is a hotel that may lose its flag at the moment of sale, which is precisely when it is worth least.

Liquidated damages.Early termination typically triggers a payment calculated from historical fees over a stated number of months. That is a real, sizeable obligation that sits ahead of your equity in any wind-down, and lenders size it into the downside case.

The comfort letter, and its limits

To bridge the transfer problem, lenders ask the brand for a comfort letter — variously called a consent or recognition agreement. What a typical one does:

Gives the lender notice of any default under the licence agreement, and a period to cure it
Lets the lender, or a receiver, operate under the licence for a defined interim period after it takes possession
Sets out the conditions on which the brand will issue a new licence to the lender's buyer, usually including a new property improvement plan and payment of outstanding fees

What it does not do: it does not transfer the licence, it does not waive the brand's standards, and it almost never binds the brand to approve any particular buyer. The interim operating period is finite. Read the length of it, because that period is the lender's actual window to sell the hotel with a flag attached, and a short window shows up as a lower loan-to-value.

Ask for the comfort letter early. It is issued by the brand, on the brand's form, on the brand's timetable, and it is a common cause of delayed closings.

The reserve that is not yours to spend

Most licence agreements and most hotel loans require a furniture, fixtures and equipment reserve — a percentage of gross revenue set aside monthly for capital replacement. Where the loan requires it, the money goes into a lender-controlled account and is released against invoices for approved work.

Two consequences. First, that reserve is not working capital, and a forecast that treats it as available cash is wrong by 4 or 5 per cent of revenue every month. Second, the reserve balance is one of the first things a lender looks at when a property improvement plan lands: a hotel that has been funding the reserve properly for six years arrives at the renovation with part of the money already in hand, and a hotel that negotiated the reserve away arrives with none.

Where the financing usually comes from

A first mortgage refinance sized to include the work, where the property has value headroom and the licence has enough term left
A supplemental or second-position loan on the existing debt, which needs the first lender's consent and an intercreditor agreement
Equipment finance on the soft-goods and case-goods portion, which is genuine personal property and can be financed separately from the construction
An SBA 7(a) or 504 structure where the property qualifies and the owner occupies and operates it; the owner-occupancy and eligibility rules are specific and worth checking against SBA owner-occupancy requirements
Brand-sponsored programmes, which exist but come with their own conditions and should be priced against the alternatives rather than accepted as a favour

What to do before you sign the next licence renewal

Get the property improvement plan scope in writing and priced by your own contractor, not the brand's estimate, before you commit to the renewal term.
Ask the brand for the comfort letter form they issue and give it to your lender early. Negotiating it at closing costs weeks.
Model the rate uplift required, using the arithmetic above, with your own room count and occupancy. If the number is not achievable, the conversation to have is about scope and phasing, and it has to happen before renewal.
Check the reserve requirement in both documents. Where the licence and the loan both require one, make sure a single funded reserve satisfies both rather than two.
Confirm the licence term against the loan maturity, and if the licence runs out first, negotiate the renewal before you close the loan rather than after.

Refuse to close a loan whose covenants require you to maintain a franchise agreement you have not read in full in the last twelve months. The two documents will be enforced together, and you are the only person in the room who is bound by both.