The money conversation

If you want to know what actually eats an operator's time at this stage, it's lending. I've been at it for over a month now. Multiple conversations running at once, a few that look promising, none of them signed. This is the part of the project nobody puts in the highlight reel, and lately it's most of my week.

So I want to bring you inside it. Not the play-by-play of who said what. The actual map I'm working from, because it took me a while to understand it myself, and it changed how I think about the whole build.

The part I didn't fully appreciate going in is this: the loan you pick isn't just about the rate. It shapes what you're allowed to do later. And for a project I intend to build, stabilize, and refinance down the road, "later" matters as much as the rate on day one. Here's the version of the map I wish someone had handed me at the start.

SBA 7(a)

The flexible workhorse. Government-backed, up to $5 million, and it can cover a mix of things (construction, equipment, working capital) under one roof. Rates are usually variable, tied to the Prime rate, so your payment moves as the Fed moves. For Cavara at our reduced Phase 1 scope, this is a real contender. The tradeoffs are that variable rate and personal collateral requirements that get heavier the larger you go.

SBA 504

The 7(a)'s specialized sibling, built for exactly what we're doing: real estate and long-lived fixed assets. It's a three-part structure. A bank funds half, a nonprofit development company funds 40%, and I put in 10%. The headline is a fixed, below-market rate locked for 20 or 25 years. On paper, it's the most attractive option in the room.

But here's where the behind-the-scenes gets interesting, and why 504 probably isn't my move. It carries a 10-year prepayment penalty. It declines each year, but it's federally set and can't be negotiated away, because these loans get bundled into bonds and sold on, and the buyers are counting on that interest. My plan for Cavara is to build, get it operating and stabilized, then do a cash-out refinance to free up equity for Phase 2. That refi is the whole point. And 504's penalty lands squarely on the exact move I intend to make in the exact window I intend to make it. The best-looking loan on the wall is the one that fights my strategy hardest. That's the kind of thing you only catch if you read past the rate.

Worth flagging one more 504 wrinkle: as of this month, the SBA is letting borrowers sequence a 7(a) and a 504 together, lifting the combined ceiling from $5 million to $10 million. Good to know the ceiling is rising. Doesn't change the prepayment math for me, but it's a real shift for the space.

USDA B&I

The one most people have never heard of, and the one that fits Cavara almost too well. It's a rural-development program, and it specifically finances rural tourism and lodging. Red River Gorge qualifies without question. Loans run much larger than SBA, terms stretch as long as 30 years, and there's a fraction of the lender competition, because most lenders don't specialize in it. The rural mandate that rules a lot of operators out is the exact thing that lets us in. This one's high on my list.

Private debt funds

The fast, flexible, expensive option. Private capital that doesn't wait on a government guarantee, so it closes quickly and bends to unusual projects. You pay for that speed with a higher rate. For us, it's a bridge or a backstop, not a first move. Good to have a number for it. Not where I want to live.

So that's the landscape. The reason I'm walking all of these at once instead of committing early is simple: the rate is the easy part to compare. What's harder, and what actually matters over a twenty-year horizon, is which structure lets Cavara do the things I already know it needs to do. Build. Stabilize. Refinance. Grow into Phase 2 without a penalty clause standing in the doorway.

So I'm doing the unglamorous work. Reading past the headline rate. Running the numbers on the exit, not just the entry. Letting the right structure earn its place instead of grabbing the one that looks best on the first page.

I'll tell you which way it lands when it lands. For now, this is the work, and I'd rather you see it honestly than dressed up.

More soon,

Jeremy