How to Finance a Microtel Franchise: New-Build Economy Hotels
By Anthony Cornella
A Microtel franchise loan almost always finances either ground-up hotel construction or the purchase of a hotel that was built for the brand. That sets Microtel Inn & Suites apart from most economy flags: the franchisor describes it as the only all new construction hotel chain in the economy segment, excluding extended stay, so owners cannot simply convert an older roadside property.
Below, we cover what the franchisor and its parent company publish, what a purpose-built economy hotel costs to develop, how construction, SBA and conventional loans fit together and what the brand’s SBA Franchise Directory note on management agreements means.
US Professional Funding is not affiliated with, sponsored by or endorsed by Microtel Inn & Suites; the name is used only to describe the business. Figures from the franchisor’s disclosure document can change from year to year, loan programs and terms vary by lender and borrower, and every loan is subject to approval. Nothing here is legal, tax or investment advice, and buyers should review the current Franchise Disclosure Document (FDD) and franchise agreement with a qualified franchise attorney, accountant and hotel consultant.
Microtel Franchise Loan at a Glance
- Franchisor: Microtel Inns & Suites Franchising, Inc., whose development site cites an FDD dated March 31, 2026.
- Brand history: the franchisor lists 1989 as the brand’s inception.
- System size: 360 hotels globally as of December 31, 2025, including 280 U.S. hotels with 19,784 rooms, according to the parent company’s annual report.
- Segment and development type: economy, offered for new construction only; every Microtel is purpose-built.
- Prototype: the Moda design, which the franchisor describes as a scalable 3 to 4 floor hotel with 58 to 81 rooms.
- Royalty and marketing: the parent company says its franchisees generally pay a royalty of approximately 5% of gross room revenue and a marketing and reservation fee of 2% to 4%; the Microtel rates are in Item 6 of the FDD.
- Agreement term: the parent company’s franchise agreements are typically 10 to 20 years.
- Initial fee and total investment: disclosed in Items 5 and 7 of the current FDD; we could not verify current figures from the franchisor’s published materials.
- SBA Franchise Directory: listed as “Microtel Inn & Suites by Wyndham” (identifier S1109), with a note about third-party management agreements.
What Is Microtel?
Microtel dates to 1989, according to the franchisor, and today operates as one of the value brands in a large hotel franchising system. The franchisor’s tagline is “Brilliantly Efficient,” and the brand targets practical business and leisure travelers in urban and suburban markets across North America and Asia Pacific.
Purpose-built hotels. Because Microtel is offered only for new construction, every hotel in the system was designed for the brand. For lenders, that means a more consistent physical product than many economy brands, where hotels range widely in age and layout.
The Moda prototype. The franchisor’s current prototype, called Moda, is a scalable 3 to 4 floor design with 58 to 81 rooms. The franchisor says roughly 70% of the building is revenue-producing space, the footprint is more than 25% smaller than earlier prototypes, land requirements are 11% lower and guest rooms are 4% larger. It also points to simplified framing and foundations to reduce material and labor costs, efficient back-of-house operations and wall-hung furniture designed to cut cleaning time.
System footprint. The parent company’s annual report shows 360 hotels with 27,561 rooms at the end of 2025, spanning the U.S., Canada, Asia and Latin America.
Why lenders view Microtel deals the way they do. Lenders like an established economy flag, a large reservation and loyalty system and uniform, purpose-built hotels. But economy room rates leave less margin, so land, construction costs and local demand must line up. A Microtel franchise loan for a new hotel is underwritten as a construction project first.
Microtel Franchise Costs
Most of the money in a Microtel franchise loan goes into land and construction, not the franchise itself. Item 7 of the FDD gives the franchisor’s estimate, but your lender will build the budget around your site, room count and market.
Initial franchise fee. The application or initial fee is disclosed in Item 5 of the current FDD. Hotel franchise fees are often tied to room count. Confirm the final amount and when it is due before your lender finalizes the sources and uses of funds.
Land and site work. The Moda prototype’s smaller footprint and reduced land requirement can lower acquisition costs, but land prices, zoning, utilities and site preparation vary widely by market. Lenders usually want the land under contract, an appraisal and environmental and geotechnical reports before committing.
Construction. Vertical construction is the largest line item. Lenders expect plans based on the brand prototype, a fixed-price general contractor’s contract, a construction schedule and a contingency.
Furniture, fixtures and equipment. FF&E includes guest room casegoods, the brand’s wall-hung furniture, beds, soft goods, lighting, televisions, in-room HVAC units, breakfast area equipment, laundry equipment and front desk technology.
Pre-opening costs and working capital. Staffing, training, supplies, insurance, marketing and a ramp-up reserve all belong in the budget.
Hotel FDDs typically break Item 7 into categories like these. Use the current Microtel FDD for the actual ranges, and make sure the line items add up to the total your lender sees:
- Initial franchise or application fee
- Land acquisition or ground lease
- Site work and construction
- Architectural, engineering and design fees
- Furniture, fixtures and equipment
- Signage
- Technology, property management and reservation systems
- Pre-opening training and expenses
- Additional funds for the initial operating period
Ongoing Fees and How They Affect Your Loan
Royalty. The parent company’s annual report says its franchisees generally pay a royalty of approximately 5% of gross room revenue. The Microtel royalty and any ramp-up schedule are set out in Item 6 of the FDD.
Marketing and reservation fees. The parent company reports a marketing and reservation fee of 2% to 4% of gross room revenue across its franchise system. Loyalty program charges, technology fees and other system charges may also apply, so collect the complete Item 6 schedule.
Brand standards. Even a new hotel will eventually need renovation, so plan for periodic replacement of soft goods, casegoods and technology.
How lenders factor these costs in. Lenders deduct franchise fees from projected room revenue along with payroll, utilities, property taxes, insurance and a reserve for replacing FF&E. What remains must cover debt service with room to spare. Because fees scale with revenue, they matter most during the ramp-up years of a new hotel, when occupancy is still building.
Franchisor Requirements for New Owners
The franchisor’s development pages do not publish a minimum net worth or liquid capital requirement for Microtel. Hotel franchisors generally evaluate a developer’s financial capacity, hotel or real estate experience and the proposed site and market before approving a new hotel.
Site approval. Because every Microtel is new construction, the franchisor reviews the proposed location, market demand and the hotel’s design. Expect to submit a franchise application with site details, a market study and your development team.
Development milestones. Hotel franchise agreements for new construction typically include deadlines to start and finish construction. Make sure your financing timeline allows you to meet them.
Approval process. Typical steps include talks with the development team, FDD review, the application and site review, signing, design approval, construction and a pre-opening inspection. Ask the franchisor for current Microtel requirements.
Ways to Own a Microtel
Building a new hotel. This is the main path into the brand, usually financed with a construction loan that converts to permanent financing or an SBA program. See our hotel start-up financing page for how we approach new builds.
Buying an existing Microtel. Owners also enter the brand by purchasing an operating hotel. The franchisor must approve the transfer, and the buyer may receive a property improvement plan (PIP) for any updates required at a change of ownership. Lenders can underwrite the hotel’s actual operating history. Learn more about hotel acquisition financing and financing brand-required renovations.
Conversions. Because the franchisor describes Microtel as all new construction, converting an existing hotel to the brand is generally not an option.
Financing Options for a Microtel Franchise
SBA 504 loans. The SBA 504 program is designed for owner-occupied real estate and long-lived fixed assets, which makes it a good fit for hotel land and construction. It typically combines a first mortgage from a lender with a second loan through a certified development company.
SBA 7(a) loans. An SBA 7(a) loan can finance the purchase of an existing hotel, construction, FF&E and working capital. The SBA 7(a) program maximum is currently $5 million, though program rules can change, so larger projects may combine programs or use conventional financing.
Conventional and construction loans. Many hotel developers use a conventional business loan structured as a construction loan that converts to a permanent loan once the hotel opens and stabilizes. These loans are sized on budget, appraised value and projected cash flow.
FF&E and equipment financing. Furniture, fixtures and equipment can sometimes be financed separately to preserve cash for construction and pre-opening costs.
Working capital and lines of credit. A new hotel needs cash for payroll, supplies and marketing before occupancy builds. A working capital reserve or line of credit helps cover the ramp-up. See our hotel working capital options.
Seller financing on resales. When buying an existing Microtel, a seller may agree to carry part of the price. Any seller note must be acceptable to the senior lender, is typically subordinate to it and may be limited by SBA program rules.
Franchisor support. The parent company’s annual report says it may provide financial support in the form of development advances or loans to help generate new business. Review Item 10 of the FDD and ask the development team whether any incentive applies to your project and what repayment or term conditions come with it.
SBA Loans for Microtel Franchisees
The SBA Franchise Directory lists franchise brands whose agreements have been reviewed for SBA eligibility. SBA lenders generally rely on it to confirm that a franchise relationship is eligible before making an SBA loan. A listing does not approve any borrower.
The listing. Microtel appears on the directory as “Microtel Inn & Suites by Wyndham,” identifier S1109. That means owners can pursue SBA 7(a) and 504 financing for a Microtel, subject to normal underwriting and the note below.
The management agreement note. The directory entry says that if the applicant also operates under a management agreement with a third party, the lender or certified development company must review that agreement under SBA rules to determine whether the applicant and the management company are affiliated. It also says the applicant is not eligible if the management company is, or is affiliated with, the franchisor.
In plain English, an owner who hires an independent hotel management company can still use SBA financing, but the lender will review the management contract to make sure the manager does not control the business in a way that changes eligibility. If the franchisor or one of its affiliates would manage the hotel, SBA financing is not available. Owners who plan to self-manage avoid this issue entirely.
Read more about SBA loans for hotels.
How Lenders Evaluate a Microtel Deal
Personal credit and financial history. Lenders review credit reports, tax returns and a personal financial statement, and they typically require personal guarantees from the owners.
Net worth and liquidity. Construction projects require substantial equity and reserves for cost overruns and the ramp-up period. Lenders want to see liquidity left over after closing.
Hotel and development experience. Hotel ownership, management or construction experience strengthens a request; first-time developers often add an experienced partner or management company.
Business plan and projections. Lenders expect a feasibility study with occupancy, average daily rate and RevPAR projections, a realistic ramp-up and all franchise fees, tied to local demand drivers such as highways, employers and hospitals.
The FDD and franchise agreement. Lenders review Items 5, 6, 7, 11, 17 and 21, the development schedule, and any comfort letter the franchisor provides to lenders. Our article on how lenders read an FDD explains which items matter most.
The site and real estate. Lenders review the appraisal, environmental reports, zoning and access.
Historical financials for existing hotels. For acquisitions, expect to provide several years of profit and loss statements, competitive set reports, tax returns and any PIP.
Construction and FF&E: The Microtel Deep Dive
Building to the prototype. Developing from a brand prototype gives lenders and contractors a known design, which can help with budgeting. Lenders still want a site-specific budget, a contractor with hotel experience and a third-party construction monitor who approves draws.
Draw schedules. Construction loans fund in stages as inspections confirm progress, usually after the owner’s equity goes in first. Many include an interest reserve to cover payments until the hotel opens.
FF&E reserves. Lenders usually require an ongoing reserve for replacing furniture, fixtures and equipment, often funded monthly from hotel revenue. Build it into projections from the start.
Multi-Unit Growth and Portfolio Development
Many hotel owners grow one property at a time, using the cash flow and equity from one hotel to support the next. Because every Microtel is new construction, growth usually means developing additional hotels or buying existing Microtel properties from other owners.
Financing a second hotel. Lenders look at the performance of your existing hotel, your liquidity and your track record of completing construction on time and on budget. If you plan several hotels, ask about multi-hotel development arrangements. Our article on buying a second hotel covers how lenders view growing owners.
Real-World Scenarios
A first-time developer building a Moda hotel. A real estate investor with commercial property experience partners with an experienced hotel operator to build a Microtel near a highway interchange. The project uses an SBA 504 loan for land and construction, and the partners keep a reserve for the ramp-up period.
An owner buying an operating Microtel. A buyer purchases an existing Microtel from its developer. The lender relies on the hotel’s operating history, and the purchase price and the PIP are financed together with an SBA 7(a) loan.
An owner using a third-party manager. An investor who does not plan to run the hotel day to day hires an independent management company. The SBA lender reviews the management agreement for affiliation, confirms that the manager is not affiliated with the franchisor and approves the loan.
Common Mistakes to Avoid
- Assuming an existing hotel can be converted to Microtel
- Underestimating construction contingencies and the ramp-up period
- Leaving franchise fees out of projections
- Signing a management agreement before your lender reviews it for SBA affiliation
- Missing development deadlines in the franchise agreement because financing was arranged too late
- Skipping a feasibility study
For more pitfalls, read about hotel loan mistakes that cost owners the most.
Next Steps to Finance Your Microtel Franchise
Step 1: Assess your finances. Gather your personal financial statement, tax returns and credit reports, and decide how much equity and reserves you can commit.
Step 2: Talk with the franchisor’s development team. Discuss your site, market and experience, and request the current FDD.
Step 3: Review the FDD with advisors. Study Items 5, 6, 7, 10, 17 and 21 and the franchise agreement with a franchise attorney and accountant.
Step 4: Commission a feasibility study. Get an independent study of your market, room count and projections.
Step 5: Talk with a financing specialist. Learn how lenders will size your loan and estimate payments with our SBA loan calculator, which is for planning only and is not an offer or approval.
Step 6: Apply for financing. Submit your request with the FDD, feasibility study, construction budget, plans and personal documents, then close and build.
Microtel Franchise Loan FAQs
How much does it cost to build a Microtel?
The franchisor’s estimated initial investment is in Item 7 of the current FDD. Actual costs depend on land, construction prices, room count and market.
What is the Microtel franchise fee?
The application or initial fee is disclosed in Item 5 of the current FDD. Confirm the amount with the franchisor before you finalize your budget.
What royalty does Microtel charge?
The parent company says its franchisees generally pay a royalty of approximately 5% of gross room revenue and a marketing and reservation fee of 2% to 4%. The Microtel-specific rates are in Item 6 of the FDD.
Can I convert my hotel to a Microtel?
Generally no. The franchisor describes Microtel as an all new construction brand.
Is Microtel eligible for SBA loans?
Yes. Microtel is listed on the SBA Franchise Directory under identifier S1109, with a note about third-party management agreements.
Can I use a third-party management company with SBA financing?
Yes, if the lender reviews the agreement and determines that there is no disqualifying affiliation. The applicant is not eligible if the management company is, or is affiliated with, the franchisor.
Can I buy an existing Microtel with a Microtel franchise loan?
Yes, with franchisor approval of the transfer. SBA 7(a) and conventional loans are both used for hotel acquisitions.
How long is a Microtel franchise agreement?
The parent company says its franchise agreements are typically 10 to 20 years. Check Item 17 of the current FDD for the Microtel term.
Does the franchisor offer financing?
The parent company says it may provide development advances or loans. Check Item 10 of the current FDD for details.
Does the FDD include financial performance information?
The franchisor’s development site cites performance data from the FDD dated March 31, 2026. Review Item 19 and base your projections on your market.
Final Thoughts
Financing a Microtel is a hotel development project at heart. Owners who secure the right site, build a realistic construction budget, plan for the ramp-up period and understand the SBA management agreement note put themselves in a strong position with lenders.
US Professional Funding helps franchise owners and developers finance construction, acquisitions, equipment and working capital for established brands. Learn more about our franchise financing and hotel and motel financing solutions.
