I have a client that is considering a lease option for a franchised hotel/motel. What type of loan program would best be suitable for the client's situation if he is placing a 10% down payment with the property value being approximately 2 million dollars. I could not locate any lenders offering conventional programs with a 90% LTV, but I was able to find SBA programs. What are the advantages and disadvantages between convention and SBA programs. I have just been introduced to commercial lending and would like to learn more in this area. I would greatly appreciate any and all advice!

Opulent,

I am an underwriter for a national "Community" bank. I do not want to mention the bank's name, but I may be able to clarify things a little bit.

SBA loans are loans that are partially (50% or 75% typically) guaranteed by the government.

The good part, from a borrowing perspective, is that loans that banks normally wouldn't do can be done because of the guarantee.

The bad part, from a borrowing perspective, is that they generally require more collateral (home equity, etc.), have higher interest rates and higher fees.

Banks will do a number of loans through the SBA that they wouldn;t do conventionally because of the government guarantee. This facilitates small business growth which is the goal of the SBA (Small Business Andministration).

Hope this clarifies things a little bit.

Regards,

TMH