How to Finance a MOD Collection by Sonesta Franchise: Conversions
By Chris Cornella
A MOD Collection by Sonesta franchise loan typically funds an upscale independent hotel that joins a soft brand while keeping its own name, design and local character. Because the collection is built around existing hotels, most financing goes toward buying or refinancing the property, completing renovations to meet brand standards and carrying working capital through the transition.
Below we cover the collection’s positioning, its published standards, its SBA Franchise Directory notes and common deal structures. The brand launched as “MOD, A Sonesta Collection” and is now also presented as MOD Collection by Sonesta.
US Professional Funding is not affiliated with, sponsored by or endorsed by MOD Collection by Sonesta or Sonesta; the name is used only to describe the business. Figures and standards from the franchisor’s materials and Franchise Disclosure Document (FDD) can change, loan programs and terms vary by lender and borrower, and every loan is subject to approval. Nothing here is legal, tax or investment advice; review the current FDD and franchise agreement with a hotel franchise attorney and an accountant.
MOD Collection by Sonesta Franchise Loan at a Glance
- Segment: upscale soft brand, according to the franchisor’s brand materials.
- Model: independent hotels join the Sonesta network and keep their own names, identities and design.
- Launch: announced by Sonesta in June 2023 alongside its upper-upscale sister collection.
- Target markets: large and small cities, lifestyle developments, college towns and leisure destinations.
- Required programs: participation in Sonesta Travel Pass, which the franchisor reported had 7.7 million members as of July 2025.
- Food and beverage: daily breakfast and a full bar are required; a dinner-capable restaurant is required where no upscale restaurants are within walking distance.
- Fees and investment: not published in the brand’s public materials; use Items 5, 6 and 7 of the current FDD.
- SBA Franchise Directory: listed as “MOD a Sonesta Collection” under code S8884, with notes on franchisor loans and management agreements.
What Is MOD Collection by Sonesta?
Sonesta introduced MOD in June 2023 as an upscale soft brand, giving independent owners access to a national reservation, loyalty and distribution network without forcing a full rebrand. The franchisor describes the hotels as “as inventive as they are distinctive,” with eclectic decor, curated food and beverage and a playful, modern personality.
Growth so far. In December 2025 Sonesta announced executed agreements for hotels in markets including Boston, Orlando, Chicago, Daytona, New Smyrna Beach, the Poconos and California wine country, with conversions expected in the following months. In February 2026 it announced the opening of a recently renovated 180-room hotel on historic Route 66 in Countryside, Illinois, near Chicago, which it called the collection’s eighth property in the United States.
The parent network. Sonesta reports about 1,100 properties across 13 brands. Member hotels are listed on its website and booked through its channels, and guests earn and redeem Sonesta Travel Pass points.
How lenders see the brand. A soft brand adds distribution and loyalty support, which lenders value, but each MOD hotel is its own concept. That means lenders rely heavily on the property’s historical performance, its market and its management team rather than on a uniform prototype. Our article on branded versus independent hotels explains how affiliation can affect value and financing.
MOD Collection by Sonesta Franchise Costs
Franchise fees. The collection’s public materials do not list an application fee, initial fee or royalty, and Sonesta states that franchise offers are made only through an FDD. Item 5 covers initial fees, and Item 6 covers royalty, marketing, reservation, loyalty and technology charges.
The hotel itself. For nearly every owner, the property is the largest cost, whether it is a purchase, a refinance of a hotel you already own or, less often, new development.
Renovation and brand standards. The franchisor’s standards call for upscale furniture, fixtures and equipment (FF&E) in guest rooms, a well-appointed bathroom, a 50-inch television, electronic door locks, strong guest Wi-Fi, an integrated property management and point-of-sale system and updated fitness equipment. A curated or eclectic decor package is required, and the hotel must be non-smoking. Our article on financing a hotel property improvement plan explains how lenders handle these budgets.
Food and beverage space. Beyond the required breakfast space and full bar, some hotels also need a dinner-capable kitchen. For a select-service property converting to MOD, adding these outlets can be the single biggest line item.
Signage and branding. Signage is light: co-branded, non-illuminated plaques at the entry and front desk and a co-branded loyalty sign at the desk. That keeps exterior conversion costs modest.
Opening costs and working capital. Expect the Item 7 table to cover categories such as:
- Application and initial franchise fees
- Property purchase or lease, or construction for new development
- Renovations and upscale FF&E for guest rooms, bathrooms and public spaces
- Restaurant and bar build-out, kitchen equipment and opening inventory
- Technology systems, including property management, point of sale and door locks
- Co-branded signage, operating supplies and printed materials
- Training, licenses, permits and professional fees
- Additional funds for the initial operating period
Add the Item 7 estimate to the property cost and renovation scope, then compare the total with your available equity.
Ongoing Fees and How They Affect Your Loan
Brand fees. Expect a royalty plus program fees for marketing, reservations, loyalty and technology. Confirm each in Item 6, along with transfer and renewal fees.
Required programs. Loyalty participation is mandatory, and primary website traffic must be directed to Sonesta channels, though local websites are allowed within guidelines. Ask how loyalty point redemptions and reservation channels are charged, because those costs grow with occupancy.
How lenders factor these in. Brand fees and a reserve for periodic FF&E replacement are deducted before net operating income is compared with debt service. Because a MOD hotel runs a bar and at least a breakfast outlet, labor and cost of goods are higher than at a rooms-only hotel, and lenders model those departments separately.
Franchisor Requirements for New Owners
The collection’s public materials do not publish net worth or liquidity minimums. Expect Sonesta to review the property’s location, condition and fit with the brand, along with the ownership and management team. Lenders, for their part, look for hotel ownership or management experience, or an experienced management company, plus liquidity to fund renovations and reserves. Our article for first-time hotel buyers covers experience expectations and third-party management.
Ways to Own a MOD Collection Hotel
Converting a hotel you own. An independent owner joins the collection, funds the required upgrades and may refinance at the same time. Lenders focus on the hotel’s track record and the renovation scope.
Buying a hotel to convert. A buyer acquires an independent or branded hotel and converts it, financing the purchase and renovation together. See our hotel acquisition financing options.
Buying an existing MOD hotel. When a member hotel sells, Sonesta must approve the new owner, and the lender reviews the property’s results under the brand.
New development. The brand’s materials focus on existing independent hotels, so ask the franchise team whether a new build fits.
Financing Options for a MOD Collection by Sonesta Franchise
SBA 7(a) loans. Because the collection appears on the SBA Franchise Directory, an SBA 7(a) loan may work for qualifying owner-operators, covering the hotel, renovations and working capital. Larger upscale hotels may exceed the program’s size, so 7(a) financing is sometimes one piece of a broader structure.
SBA 504 loans. The SBA 504 program fits owner-occupied real estate and long-lived improvements, such as the hotel building and major renovations, and pairs with a first mortgage.
Conventional loans. Larger properties often use conventional commercial loans sized on the hotel’s cash flow and appraised value. Our conventional loan calculator can help with early planning.
FF&E and equipment financing. Guest room furniture, televisions, door locks, fitness equipment and kitchen and bar equipment can be financed separately, preserving cash for construction work.
Working capital and lines of credit. Leisure and college-town hotels often see seasonal swings, and a bar and restaurant add payroll and inventory. See our hotel working capital options and our article on managing seasonal hotel cash flow.
Seller financing on acquisitions. A seller may carry part of the purchase price. A seller note must be acceptable to the senior lender, is typically subordinate to it and may be limited under SBA program rules.
SBA Loans for MOD Collection by Sonesta Franchisees
SBA lenders generally confirm that a brand appears on the SBA Franchise Directory before making an SBA-guaranteed loan to one of its franchisees. A listing does not approve any borrower; it means the franchise relationship has been reviewed for eligibility.
The brand’s listing. The collection appears as “MOD a Sonesta Collection” under code S8884 with two notes.
Franchisor loans. If the franchisor or an affiliate lends money to the applicant, the SBA lender or certified development company must include that loan in its credit elsewhere review. In plain English, if a conversion incentive is structured as a loan, the lender must consider whether it reduces your need for SBA financing. Tell your lender about any incentive early.
Management agreements. If a third-party company will manage the hotel, the lender must review the management agreement to decide whether the applicant and the manager are affiliated. The applicant is not eligible if the management company is, or is affiliated with, the franchisor. Because Sonesta also operates hotels, settle the management question before you apply.
Program size. The SBA 7(a) program maximum is currently $5 million, although program rules can change.
How Lenders Evaluate a MOD Collection Deal
Personal credit and financial history. Guarantors’ credit, tax returns and personal financial statements are reviewed.
Net worth and liquidity. Lenders want equity for the purchase and renovation, plus reserves for overruns and the period when rooms or outlets are out of service.
Hospitality experience. A hotel with a bar and restaurant is more complex than a rooms-only property. Lenders look for food and beverage experience on the team or a qualified management company.
Business plan and projections. Projections should separate rooms, food and beverage, brand fees and an FF&E reserve, and should support any revenue lift expected from the loyalty program and Sonesta’s booking channels with realistic assumptions.
The FDD and franchise agreement. Lenders review term, termination, transfer and renovation obligations and any incentives.
Property and market. Expect an appraisal, a condition report and a market study.
Historical financials. For conversions and acquisitions, several years of operating statements usually carry more weight than projections.
Design, F&B and Brand Standards
MOD gives owners room to keep their own design story. Sonesta recommends that each hotel use its own designer or design support and expects lobby touches the brand calls “(MOD)ern Moments” along with local elements. Bath amenities can be an approved upscale local package, and in-room amenities include items such as a hairdryer, mini-fridge, iron and in-room coffee.
Meeting space is optional, but where it exists it must have upscale FF&E.
For financing, the key is a clearly defined scope. Lenders want contractor bids for each item, a schedule showing which rooms and outlets are out of service and when, and a contingency for surprises in older buildings.
Multi-Unit Growth
A MOD Collection by Sonesta franchise loan for a second property works much like the first. Because each hotel keeps its own identity, an owner can bring several independent properties into the collection over time. Lenders generally want the first conversion stabilized before financing the next, and they underwrite each property on its own cash flow. Our article on buying a second hotel covers how growing owners approach financing.
Real-World Scenarios
A college-town owner converting. The owner of an independent hotel near a university joins the collection, using an SBA loan to refresh guest rooms and expand the bar while keeping the hotel’s name.
An investor buying a leisure property. An investor acquires a beach hotel, combining a conventional loan for the purchase and renovation with a line of credit for the off-season, and hires an independent manager the lender reviews for affiliation.
Common Mistakes to Avoid
- Underestimating the cost of adding required food and beverage outlets
- Leaving brand fees and an FF&E reserve out of projections
- Choosing a management company without checking the SBA affiliation rule
- Accepting a franchisor incentive loan without telling your lender
- Starting renovations without working capital for out-of-service rooms
Learn more about hotel loan mistakes that cost owners the most.
Next Steps to Finance Your MOD Collection by Sonesta Franchise
Step 1: Contact the franchise development team. Discuss your property and request the current FDD.
Step 2: Review the FDD. Study Items 5, 6, 7, 10, 17 and 19 with a hotel franchise attorney and an accountant.
Step 3: Define the scope. Get the franchisor’s list of required upgrades and contractor bids for each item.
Step 4: Talk with a financing specialist. Compare SBA, conventional and combined structures for your MOD Collection by Sonesta franchise loan.
Step 5: Settle management. Decide who will run the hotel and share the agreement with your lender early.
Step 6: Apply and close. Submit historical financials, projections, the appraisal and renovation budget, and schedule work around closing.
MOD Collection by Sonesta Franchise Loan FAQs
How much does a MOD Collection by Sonesta franchise cost?
No investment range is published. Your cost depends on the hotel, the renovation scope and Item 7 of the FDD, which also lists fees in Items 5 and 6.
Is MOD a soft brand?
Yes. Hotels keep their own names, identities and design while joining Sonesta’s distribution and loyalty network.
Can I get an SBA loan for a MOD hotel?
Yes, subject to approval. The collection is listed on the SBA Franchise Directory under code S8884, with notes on franchisor loans and management agreements.
Can I use a management company with SBA financing?
Yes, but the management company cannot be, or be affiliated with, the franchisor.
Can I finance the renovations?
Often, yes. Renovation costs can be included in an acquisition or refinance loan, or financed separately with FF&E and equipment financing.
Does the franchisor offer financing?
Check Item 10 of the FDD. If the franchisor or an affiliate lends you money, an SBA lender must factor it into its review.
How long is the franchise term?
The brand’s public materials do not state it. Item 17 of the FDD covers term, renewal and transfer.
Can a first-time hotel owner qualify?
It is possible with strong finances and an experienced management company, subject to franchisor and lender approval.
Final Thoughts
MOD Collection by Sonesta lets upscale independent hotels plug into a national network while keeping their personality. A strong MOD Collection by Sonesta franchise loan rests on the hotel’s own results, a clearly scoped renovation, careful attention to the SBA directory notes and enough working capital to carry the transition.
US Professional Funding helps hotel owners and buyers finance acquisitions, conversions, renovations and working capital. Learn more about our franchise financing and hotel and motel financing.
