In today's credit market, obtaining any working capital is very difficult as it is considered cash out, a concept of the past when it comes to hotel financing. In some cases however, working capital may still be structured into the loan. As for paying off any loans or liens, it must be proven that the funds for those loan was used for the hotel. Any documentation indicating the original use of funds can be submitted to qualify those loans for refinancing.
The cost of the improvement plans can always be included in the refinancing structure as in many cases, obtaining the property improvement dollars specially when it is a considerable amount is the very reason behind the refinancing. In rebranding projects, the PIP cost is fairly high and the key is to make certain that the appraisal takes into account the correct projected revenue and the CAP rate of the subject hotel after the rebranding is complete in order to arrive at the required Loan to Value for the refinancing of the hotel.
Scientific Capital Group, Inc. (www.scicap.com)
