By Ryan Bosch
The real surprise isn’t that regional banks are back in hotel lending—it’s that they’re offering a combination of pricing, flexibility and structural advantages that no other capital source on the board can match for stabilized middle-market assets. Most borrowers are still defaulting to whatever capital source they used last cycle without evaluating the full menu. Over the past few months, regional banks have been re-entering the market with a real appetite and terms that have been surprising even experienced borrowers. Their playbook is a little different, but borrowers who understand and adjust to their new parameters may be able to access cheaper, more stable capital than those relying on the debt fund structures that have been at the core of hotel lending since 2023.
The regional banks coming back to hospitality lending are taking a selective approach to the projects that they decide to finance, and the borrowers who are getting capital from regional banks are the ones showing up with the right deal profile. The opportunity inherent in this situation is that the broader market hasn’t adjusted to this returning player. Borrowers, especially those in the middle market, who are able to build their deal profiles to appeal to regional banks are going to be at a major advantage.
What changed
There are a few reasons that banks that previously said no to hospitality projects are currently reconsidering their stance. The pullback accelerated after Silicon Valley Bank’s collapse in March 2023, which triggered heightened regulatory scrutiny and froze hotel lending at many regional institutions. One of the biggest is that banks are seeing a major uptick in deposits. In fact, according to the FDIC, total domestic deposits grew by roughly $900 billion from Q3 2023 through Q3 2025. Specifically, community bank deposits grew 4.7% in 2024 and their share of total domestic deposits jumped to 16.6% by Q2 2025. These numbers mean that regional banks now have the funding base to originate new loans.
Banks have also spent the past few years tightening their balance sheets and running off problem loans, and as a result, many institutions have renewed appetite for lending. Hotels, with their daily cash flow visibility and operational data transparency, are a natural fit for banks looking to deploy capital into performing commercial assets.
The new playbook
Borrowers looking to partner with regional banks on hospitality projects need to have a thorough understanding of where the market currently stands, as well as what these banks have to offer.
Starting with pricing, regional bank coupons on permanent debt in the hospitality space are sitting in the mid-6% range. To put that in context across the capital landscape: CMBS 5-year fixed loans are pricing in the high 6% to low 7% range, life companies are quoting similarly for lower-leverage deals and debt fund all-in costs are running 8% to 9% with spreads of SOFR + 350 to 500 bps on transitional deals. Regional banks are not just one option among many; for stabilized assets in the middle market, they are pricing at or below every other permanent capital source available. Deals under $20 million are still the most common because more institutions can offer loans at that size. The $20 million – $50 million range is active, but has fewer participants, so competition will be tighter.
Further, in the middle market, where activity from regional banks has been the most concentrated, banks are underwriting up to 65% loan-to-value ratios, with outliers reaching 70%. That ceiling was previously assumed to only apply to debt funds. This means that assets with strong trailing cash flow can push leverage higher.
It is worth noting that offering deposits can push the needle on pricing or leverage, but it’s not necessarily a must-have for regional banks in 2026, as they generally expect to hold the operating account for the asset they’re financing.
Regional banks overwhelmingly require recourse on hotel loans, and that is a real consideration. But recourse is only one variable in a broader equation. The question for borrowers is not simply “Can I avoid recourse?” It’s “What am I getting in return?” With a regional bank, the answer is often: a lower coupon, lighter covenants around DSCR triggers and reserve requirements, more flexible prepayment structures, seasonality-aware servicing and a lender you can call directly when something changes. For a middle-market owner sitting on a stabilized asset they believe in, that total package frequently outweighs the non-recourse protections offered by CMBS or a debt fund.
Timing also continues to play a critical role in a deal’s feasibility. For example, regional banks can be a viable takeout option for borrowers with approaching CMBS maturities, if the borrower plans ahead. Banks need about six months of runway to run their processes, so hoteliers planning six to twelve months ahead will be in a better position to leverage regional bank loans.
Pricing gets the attention, but the real differentiator for regional banks may be the loan structure itself. Standard amortization is 25-year P&I, but banks are offering prepayment flexibility that CMBS and many debt funds simply cannot match. More importantly, bank loan documents tend to carry materially lighter covenants around DSCR triggers, reserve requirements and seasonality adjustments. A CMBS loan might trip a cash sweep if DSCR dips below 1.25x during a slow shoulder season; a regional bank lender who understands hotel cash flow patterns is more likely to work through that with you. For hoteliers who have to live with the loan for five to seven years, that structural flexibility is often more valuable than a 50-basis-point pricing advantage from another capital source. It is the difference between a lender who monitors covenants and one who understands your business.
As with any hotel deal, lenders have their preferences regarding asset type and location. Select-service and extended-stay continue to draw reliable funding, but stabilized full-service assets are also on the table if the borrower is willing to give recourse. Regarding location, the Pacific Northwest, Midwest and Sunbelt are particularly attractive to regional bank lenders.
The window is open, not permanent
Private credit isn’t going away, and debt funds remain essential for construction, bridge and value-add execution. But, for middle-market borrowers sitting on stabilized assets, regional banks are back, they’re competing and they’re offering good terms. Borrowers who recognize that early and show up with the right deal profile will access cheaper, more stable capital than peers still defaulting to debt funds. The next step: Audit your existing portfolio for assets that fit the regional bank profile, and open a conversation with two or three institutions in your market before the window tightens.
Ryan Bosch, principal at Arriba Capital, is a seasoned expert in hospitality debt and structured finance, managing a portfolio exceeding $2 billion across 140 deals.
This is a contributed piece to Hotel Business, authored by an industry professional. The thoughts expressed are the perspective of the bylined individual.
