Every bed and breakfast owner know how to make people feel contented, but that perfect environment usually have need for extra investment. Whether you need to make repairs, upgrades, or require more staff, constant cash flow is essential to ensure success of your B&B.

In order to increase revenue and to keep up with the changing demands, funding is often required. Securing a bed and breakfast loan is the way to have those costly repairs, upgrades, additions, or hiring and achieve your goals.

There are numerous business loans for B&Bs that can help you grow, take advantage of the opportunities, and help stay solvent during your slower seasons. In this guide, we’ll walk you through some of the best business loan options for bed and breakfasts, and help you assess which option to choose based on your needs.

Why Bed and Breakfast Owners Borrow?

Among many, here are the top needs of B&B that require borrowing:

  • You need to expand your offerings such as addition of extra rooms, more space, outdoor sitting, extended menu or maybe kitchen upgrades. The reason could be anything and it could make the difference in growing your business and clientele.
  • Your existing rooms are dreary and archaic that necessitate remodeling. A clean, modern upgrade can help boost your guest satisfaction and make them feel welcomed.
  • You might need cash for your day-to-day operations. If you’re having a slower season, need an extra space or to face any financial challenge, a short-term capital can help fill the gap until you rebound and make progress again.
  • Managing your guests requires a lot of effort because customer satisfaction and service quality matter the most in this industry. All that necessitate more staff in the workplace. Your customer’s experience and words of mouth is a great way to bring about new customers.

Business Loan Options for Bed and Breakfasts

Before jumping into the best business loan options for Bed and Breakfasts, you should consider few things:

  • How quickly the cash is required
  • Are you willing to do the paperwork
  • For what purpose the money is required
  • How much capital you can afford
  • Are your business financials strong enough

Understanding all these considerations will help you find the best business loan for your bed and breakfast based on your affordability and qualification.

See Your Business Loan Options

Best Overall: SBA Loan

Small Business Administration (SBA) loans are widely considered the best business loan for bed and breakfasts with higher loan amounts, longer repayment terms, and lowest interest rates.

SBA loans are provided through a network of banks and alternative lenders and are guaranteed up to 85% by the federal government through the U.S. Small Business Administration (SBA). The guarantee protect the lenders in the case borrowers default on the loan—making them less risky for lenders and favorable for borrowers. Of course, SBA loans are highly competitive; only the most qualified borrowers with a strong financials and credit score can qualify.

The most popular types of SBA loans are SBA 7(a) loan and SBA 504/CDC loan, which provides instant working capital for small businesses. SBA 7(a) loan are like a traditional business term loan or a business line of credit, and SBA 504/CDC loan are for fixed assets purchases like real estate.

SBA loans take time to approve (up to 4-8 weeks) and involves a significant amount of paperwork. If you need money fast, it’s recommended to look for other options.

Best for Startups: SBA Microloan

Lenders approval decision is primarily based on borrowers creditworthiness, And as new bed and breakfasts business owner, you might not have one. But that doesn’t mean that you can’t secure capital. SBA Microloans are the most suitable options especially for startups, which provide loan amounts up to $50,000. To qualify for SBA Microloans, you need to have a strong personal credit.

Like all other SBA loan types, Microloans also take a lot of time for approval. However, with their favorable terms, they’re worth to apply for.

Best SBA Loan Alternative: Business Term Loans

When you’re unable to qualify for SBA loans, business term loans are a better alternative. Business loans have less stringent requirement and are structured as lump sums of capital. For risky borrowers, the terms can be short with higher interest rates and vice versa.

Generally, medium-term loans have repayment terms of one to five years, and short-term loans have repayment terms of 18 months or less. Securing business term loans is far speedier than SBA loans. If your paperwork is complete with all the necessary documents, you may get an approval decision in as little as 24 hours.

Best for Incremental Expenses: Business Line of Credit

A business line of credit is an appropriate option especially for businesses with incremental expenses. In a credit line, you’re provided with a credit limit to draw from as you need it. The best thing about a business line of credit is that you only pay interest on what you use. A business credit line is best for quick repairs, upgrades or for cash flow issues. While running a B&B, you might need additional seasonal staff, low margins, pay for operational expenses, payroll, and similar expenses, this is where a business line of credit can help.

A business credit line also offers quick turnaround on approval for qualified borrower with little paperwork. A business with 6 months of time in business can also qualify for a business line of credit, which is also a plus over other types of loans.

See Your Business Loan Options

Alternatives Financing Options for B&B

If you don’t qualify or want to secure a traditional business loan for your bed and breakfast, there are alternative financing options available as well.

  • Business Credit Cards

As a B&B owner, you might be using a business credit card for expenses like food, utilities, supplies, laundry etc. But business credit cards can also be used as for larger projects. It’s recommended to secure a 0% introductory APR business credit cards, which allows you to spend money without accruing interest for an introductory period (up to one year). This way you can finance the larger projects inside your B&B, and then find a way to repay before the interest period starts. Make sure you’re able to pay off your balance before the introductory period is over, else this won’t be a practical funding option for your B&B.

  • Personal Loans for Business

You can also get a personal loan for your B&B based on your personal credit. This loan is helpful specifically for startups with strong credit scores. The loan amounts on personal loans will be lower as compared to business loans, and it’s risky since you secure it against a personal collateral.

  • Business Loans for Seasonal B&Bs

Many business owners experience high and slow seasons while running their businesses. During slow seasons, you might t pay for utilities, Mortgage payments, and bills. Getting business loans for B&Bs can help cover with expenses incurred in the off season. The best time to apply for a business loan is the end of your high season. This is important because you want to have the capital by the time when the guest bookings are low, and you want to show your strongest months to the lender while applying for business loans.

Prepare Your B&B Business Loan Application

Early preparation is the key to success and once you’ve decided to proceed with a business loan, the lender will need to review your financials. If you’re prepared in advance with your paperwork and documentation, it can help speed up the loan process. Here is a list of documents every business need to prepare when applying for loans:

  • Personal Identification
  • Proof of Business Registration
  • Business Licenses and Permits
  • 3 months of business bank statements
  • Personal and business tax returns
  • Financial Statements
  • Accounts Receivable Aging and Accounts Payable Aging
  • Proof of Collateral
  • Business Plan

A credit score plays an important role in a business loan application, and understanding your score before making an application will help you understand your loan options, and, in turn, what your interest rate may be. You can pull your credit report for free yearly from any of the three major credit-reporting agencies.

Finding the Best B&B business loans

Having a clear understanding of what loan type you need and can afford will saves you a lot of time and effort. We hope you’re happy to know that you have many options for B&B business loans. In order to get prepared for your loan application, start understanding your financials, credit score, accounts, and, of course, how much cash you need and can afford. If you’re unable to get that information, ask your accountant to get a clear understanding of your financial position—so you can be on your way to get a business loan.

Doing your research for B&B financing options will provide you with the opportunity to understand the different business loan types and alternatives available, as well as the opportunities to expand your B&B business.

Small Business Financing News │ Merchant Advisors | blog
Best Business Loans Options for Bed and Breakfasts (B&Bs)
Best Business Loans Options for Bed and Breakfasts (B&Bs)
Looking for funding to fund your small business? The road ahead is full of twists and turns because it does require a lot of time and research to locate the best funding program that suits your business. Due to theRead more
In this article, we have listed the best business loan options for bed and breakfast, and help you assess which B&B business loan to choose.
MichaelGavin
Merchant Advisors
Merchant Advisors
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