Everyone loves to travel. Traveling inspires and provides comfort regardless of it be for work or vacation. Luckily, with the availability of so many travel agencies traveling the world has been more than easier than before. Moreover, the role of travel agents has transformed moderately as the booking has moved online, and it’s your expertise that sets you apart and can assist travelers to make full use of their experiences in wide-ranging destinations.
Many travelers today are in search of niche experiences without the aggravation of confronting airlines – since we all know how monotonous and annoying that can be. The travel agency industry is on the rise, with more and more people are congregating to these travel agencies to experience a relaxed, soothing, distinctive travel experience. For many, that means discovering financing options for travel agencies to help update services, office space upgrades, marketing, or hire new talent to gain new clientele.
Irrespective of your need for travel agency business loans, many financing options can help you realize your business goals. We’ve outlined some of the best business loan options to help you grow by understanding the loan process along with requirements criteria to apply for a travel agency business loan.
When A Travel Agency Needs Funding?
- A solid digital presence is an essential aspect of every business’s success, especially for travel businesses. Online booking agencies are the real competition in the digital sphere since customers heavily rely on doing first-hand research of everything about a travel agency; social media presence, online reviews, and reliability before deciding to actually visit and get a service from them. Marketing requires capital and this is where a business loan can help.
- The overwhelmingly impact of technology in the travel agency industry means new equipment and state-of-the-art technology are essential to thrive. Meaning, you need to have the latest Point of Sale (POS) systems, flight and hotel booking systems, booking databases, or augmented/virtual reality touring systems. To buy such expensive technology, there are merchant loan options available.
- When everything is doing well for a travel business, expansion is an exciting idea. If you’re short on capital, expansion might seems very difficult. A business loan can help a successful travel agency to expand and keep on growing.
- In today’s competitive world, staying up to date trendy is very important, which means renovating your brick, and mortar retail storefront is essential to compete. So, make sure your travel agency storefront is modernistic and engaging to the desired customer base. Sometimes renovation requires additional funding to facilitate and complete a desirable change; exploring different business loan options can help to fulfill that change.
- Payroll is an unavoidable expense and for many, it can difficult to manage, whether because of the slow season or an unexpected emergency. To produce effective work, the business must facilitate employees and cover payroll costs. There are many financing possibilities that can help cover payroll costs for travel business owners.
- Taxes and miscellaneous fees can be an inconvenience for any growing travel agency. With the availability of additional funding options, you can easily cover such miscellaneous fees that might be difficult to manage during that time.
The Best Business Loans for Travel Agencies
There are different types of business loans you can explore for your travel agency. Here is the list of best business loan for travel agencies:
- SBA Loans
- Term Loans
- Business Lines of Credit
- 0% Intro APR Credit Card
- Merchant Cash Advances
SBA loans are the most desirable financing options because of their favorable terms like higher loan amounts, flexible repayment terms, and lower interest rates. Since these loans are guaranteed up to 85% by the federal government, lenders are able to offer excellent terms at less risk. Less risk means better loan terms structured as lump-sum “traditional” loans or lines of credit.
Because of the favorable terms on these loans, they are competitive to qualify for travel agencies and other businesses alike. A solid credit standing with a good business track record will be required to qualify for SBA loans. These loans can be used to make large purchases like fixed assets such as real estate and buildings as well as working capital. Popular SBA programs are SBA 7(a) loans and SBA 504/CDC loans.
It is also important to note that the SBA loan application process is longer as compared to other types of business loans, involving a lot of paperwork, financials along with some SBA specific forms.
Business Term Loans
If you’re unable to qualify for SBA loans, you’ll feel good to know there are alternatives available. Business term loans are another best alternative to SBA loans providing a lump sum of cash deposited in your business bank account once approved. The application for term loans is quick, with minimal paperwork, and decision in 24 hours.
- Medium-Term Business Loans
Medium-term business loans are the most suitable option for travel agencies that need storefront upgrades, new equipment’ or only require working capital. Medium-term loans have three to five years of terms with monthly repayments.
- Short-Term Business Loans
Short-term business loans are generally for three to 18 months with repayment on a weekly or daily basis. This can be a little costly than longer-term loans, but be useful when you quick capital for short-term expenses or emergencies.
Business Lines of Credit
The flexible use of capital is key for most businesses; this is where business lines of credit come handy. A business line of credit works similar to a credit card with the only difference is that you get cash in your business bank account rather than spending on a card. With a business line of credit, you approve for a credit line, which you “draw” against as and when you need capital. The best thing about a business line of credit is that you’ll only pay interest on what you draw—and you can generally use the full credit amount again once your draw is paid off.
A business line of credit is particularly helpful to manage cash flow issues like monthly payroll, or covering overheads. Using c credit line can help you through a cash crunch—making it a great option for seasonal businesses like travel agencies.
0% Intro APR Credit Card
Securing a 0% introductory APR business credit card can also help. With such cards, you can spend money with an interest-free predetermined period, which, in certain cases, goes up to a year. During this interest-free period, you don’t have to worry about accruing extra interest or fees on unpaid balances, and you can easily plan your repayment accordingly by the end of the interest-free period.
Be cautious while using a 0% introductory APR business credit card once the predetermined period is over. After the period is over, the interest will start at a Prime market Rate so paying your balance before that is the key. You can get quick approval on a 0% intro APR credit card if you’re qualified. So, when quick cash is needed, don’t avert this business loan type.
Merchant Cash Advances
A merchant cash advance is another suitable business loan option for travel agencies. If your travel agency doesn’t have good credit or adequate paperwork to secure other business loan options, considering a merchant cash advance (MCA) or ACH loan can be another option. With an MCA or ACH advances, you’re exchanging your agency’s future credit and debit card revenue for immediate cash. The repayment is made daily, with the payments coming directly from your credit card processing account or from your business bank account at factor rates between 1.16-1.50% with terms from four months to two years.
How to Pick the Best Business Loan for Your Travel Agency
Now you’ve reviewed the different business loans for travel agencies, here is an overview of how to pick the best business loan for your travel agency.
Know What You Need
Primarily, while evaluating your business loan options, you should know why you need a business loan Whether you want to finance a specific project, need to cover an expense, or just need working capital to watch out a bunch of different costs.
Next, how quickly you need the money. As mentioned above, some business loans have a quick turnaround time—within 24 hours to a few months based on their application process. If you need funding fast, an SBA loan might not be a suitable option. However, if you’re thinking about expanding or renovating, a line of credit or term loan is more suitable.
Lastly, how solid is your financials. Your financial profile is what actually establishes your financing options—irrespective of the loan type you need. A low financial profile means you’ll have limited loan options with unfavorable interest rates and repayment terms. Understanding your financials can help you get an early advantage in the loan process.
The Business Loan Requirements
Finally, you’ll need to understand the business loan requirements you’ll have to meet. This depends on the loan type and the lender with whom you’ll work. If you want to speed the approval process, here is a list of documents you should have ready for the lenders:
- Personal identification
- Business licenses and permits
- Personal and business credit score
- Business bank statements
- Business and personal tax returns
- Financial statements
- Business plan
- Loan purpose
- Proof of collateral
- Disclosure of other debts
- Accounts receivable and accounts payable aging
Again, different lenders will have different documentation requirements, but having the above-mentioned list ready is helpful for you to be prepared early.
The Bottom Line
Running and managing a travel agency business involves different expenses. Optimistically, now you’ll know there are many business loan options available for travel agencies to help you accomplish your business goals.
If you’re not comfortable with pledging your personal assets as collateral just to qualify for travel agency business loans, working with an alternative lender like Merchant Advisors can get the job done. If you are in need of a fast business loan or merchant cash advance, call us today at (866) 572-7775 to discover more about our small business loan programs and the different industries we fund.