Hotel developers go green to qualify for larger loans

By Sundip Patel

Energy efficiency pays off

The Small Business Administration has offered SBA 504 loans for years. These 10 to 20 percent down, fixed-rate loans of up to $5 million have long been a much-needed solution to financing for America’s small businesses. But now, for developers seeking to fund the expansion of an existing hotel or build a new hotel, an even sweeter option exists.

The SBA 504 Green program offers loans of up to $5.5 million, providing the opportunity to develop larger, more upscale properties. The only catch? The hotel must be energy efficient.

Meeting the program’s requirements

Whether renovating an existing property or building a new hotel, you’ll need to prove you can reduce energy usage by 10 percent to qualify for an SBA 504 Green loan. The savings can be gained from improved HVAC systems, efficient lighting, better insulation, double-glazed windows, and other facility upgrades.

You can also qualify for the SBA Green 504 loan by producing your own renewable energy using solar power, wind power, hydropower, biomass, biodiesel, geothermal, and ocean thermal energy.

If your hotel goes green, you may find it’s an attractive selling point in competing for new business.

Atul Patel, who is currently building a Hilton Garden Inn in Lompoc, California, took advantage of the SBA 504 Green loan program by adding a renewable energy system. His hotel will have a rooftop solar system that heats the pool and helps power the hotel.

“The solar system will create a 10–15 percent reduction in energy costs, which could amount to as much as $60,000 in savings a year,” explained Patel. “And with the additional capital provided through the SBA 504 Green program, we were able to maximize the size and amenities of the hotel, which we think will result in a better property that generates greater revenue.”

Develop multiple hotels

In addition to allowing for larger SBA loans, the SBA 504 Green loan permits multiple SBA loans to the same individual or group. It removes the $5 million limit per borrower so developers can acquire, build, or refinance multiple hotels. And each project that meets the energy requirements is eligible for the maximum $5.5 million amount of SBA financing.

Go Green
Going green is good for business

In recent years, more people have become environmentally conscious. They take green practices into consideration when making purchases, showing support for organizations that are environmentally responsible. If your hotel goes green, you may find it’s an attractive selling point in competing for new business.

Advanced planning is best

Qualifying for an SBA 504 Green loan takes planning. Build the green components into the project from the initial design stage, not as an afterthought. And be sure all parties are aware of the green initiative. Better coordination during development could lead to cost savings.

Save energy, get funded

If you once thought that incorporating energy-saving upgrades into your new or existing hotel would be beyond your budget, the SBA 504 Green loan program makes it worthy of your serious consideration.

The SBA 504 loan has always been an excellent program, opening doors for America’s entrepreneurs including hotel developers. The green component makes it even better.

About the author

Sundip Patel has been in the commercial banking industry for over 14 years. He serves as the CEO of AVANA Capital and is involved in all aspects of the business. Sundip has worked in public and private accounting, gaining experience in mergers and acquisitions, tax planning, leverage buyout financing, and securing U.S. government contracts.

Patel Sundip


With offices in Arizona, and Manama, Bahrain, AVANA offers owner occupied commercial real estate financing through conventional, bridge, and SBA 504 lending programs for acquisition, refinance, and construction. Since its founding in 2002, the company has funded more than $900 million in loans and is known for its speed and certainty of execution.

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