The Impact of Increased Rates on SBA Lending

PMC Commercial Trust’s Laurie Ivy discusses SBA 7(a) loans, borrower hesitation, and higher loan-to-value ratios

The current state of the hotel refinance market is causing some hesitation among borrowers, according to Laurie Ivy, senior vice president of lending for PMC Commercial Trust. Despite the potential for lower interest rates in the future, borrowers are still nervous about taking out loans.

PMC Commercial Trust is one of only 14 non-bank lenders that provide SBA 7(a) loans, which can be used for hospitality assets or other owner-occupied commercial real estate. These 25-year, fully amortized loans can be used for acquisitions, refinancing, or renovations and range from $750,000 to $5 million. The loan-to-value ratio is generally around 80% and can go as high as 85%, with the government guaranteeing 75% of the loan.

However, Ivy noted that borrowers are hesitant to take out SBA loans due to concerns about rising interest rates and other costs. This hesitation has led to fewer acquisitions and more buyers backing out of deals. Ivy explained that SBA borrowers often rely on gut feelings rather than complex analysis when making decisions.

Despite the challenges, PMC Commercial Trust continues to provide SBA loans and is seeing an increase in refinance deals due to limited options in the market. Ivy emphasized the importance of including the complete Property Improvement Plan (PIP) in the project cost and highlighted the difficulty of refinancing compared to acquisitions.

Overall, the hotel refinance market is facing uncertainty, but lenders like PMC Commercial Trust are working to provide solutions for borrowers in need of financing.

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