Business Loans for Bed and Breakfasts: The Top Options

Updated on September 9, 2020
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Getting a Business Loan for a Bed and Breakfast

Whether you’re just starting your business, or your doors have been open for a long time, you may find that you’re in need of financing for your bed and breakfast. The good news is that you have a lot of different options for business loans for B&Bs, which can help you grow your business, let you take advantage of opportunities, or enable it to stay solvent during your slower seasons.

We’ll go through some of the best options for business loans for bed and breakfasts, and help you figure out which to choose. Among other elements, what’s best for your B&B will depend on what you plan to use the capital for and how quickly you need access to it.

The Best Business Loans for Bed and Breakfasts

We’ll go through a few different options for obtaining business loans for B&Bs. As you consider your options, take into consideration the following:

  • How quickly you need to obtain cash
  • How much paperwork you’re willing to do
  • How you want to use the money
  • How much capital you need
  • How strong your business financials are

All of these will contribute to finding the best business loan for your bed and breakfast, and help match you with a loan that you can both afford and will enable you to accomplish your goals.

See Your Business Loan Options
  • Best Overall B&B Business Loan: SBA Loan

    Widely considered the best business loan available, SBA loans are ideal business loans for bed and breakfasts. They offer high capital amounts, long repayment terms, and generally the lowest interest rates available.

    SBA loans are offered through lenders, such as banks, but what makes them special is that they’re guaranteed up to 85% by the federal government through the U.S. Small Business Administration (SBA). That protects lenders in the case of default—which means their risk for lending is lower, and they can offer those favorable terms to borrowers. Of course, because these loans are so desirable, they’re the most competitive, too; only the most qualified borrowers with a strong track record and solid credit will qualify.

    There are two main types of SBA loans you’ll want to know about. The first and most popular loan is the SBA 7(a) loan, which provides working capital for business owners. This is either in the form of a term loan—what you might think of as a traditional lump-sum business loan—or a business line of credit (we’ll explain this in more depth below). The second is the SBA 504/CDC loan, which is meant to help businesses obtain major fixed assets—and is specifically helpful for real estate.

    Also worth noting is the timeline for SBA loans for bed and breakfasts. If you need fast capital, you’ll want to look elsewhere, since the timeline for these is generally at least two months and involves a significant amount of paperwork.

  • Best Loan for New B&Bs: SBA Microloan

    As you’re researching business loans, you’ll find that having a financial history is important; lenders can’t otherwise evaluate your risk and how good you are with credit. Of course, this is a challenge for new bed and breakfasts—but that doesn’t mean that you don’t still need access to money.

    If you’re just starting out, you may want to look into SBA microloans, which provide up to $50,000 for emerging entrepreneurs. In order to qualify, you should have a strong personal credit history, and a background in either business or your specific industry doesn’t hurt, either. Many of these loans are also awarded to veterans, women, and minority business owners.

    Keep in mind that, like their other SBA loan counterparts, these loans aren’t quick turnaround. But their terms are also very favorable, so for many new businesses, it’s worth it.

  • Best SBA Loan Alternative for B&Bs: Business Term Loans

    Since not every business owner will qualify for an SBA loan, business term loans are a good alternative. These loans are structured as lump sums of capital that are deposited into your business bank account after you are approved through a business lender.

    A much wider group of business owners will qualify for business term loans as their requirements aren’t as stringent. There’s a small tradeoff here: As lenders take on what they view as riskier borrowers, the interest rates may be higher and your repayment periods may not be as long.

    In general, medium-term business loans have repayment periods of one to five years. Short-term loans have a quicker turnaround for repayment: 18 months or fewer.

    You’ll likely be pleased to know, though, that these term loans are far speedier to obtain than SBA loans. If you’re prepared with your documentation, you may get an approval decision in as little as a single day.

  • Best B&B Loan for Incremental Expenses: Business Line of Credit

    If you need a loan to help you with costs that you incur here and there, a traditional loan structured as a lump sum likely won’t be the best fit for you. That’s where a business line of credit comes in: This type of loan enables you to borrow against a credit line (what’s called a “draw”) as you need it. And best of all, you only pay interest on what you use. Maybe you need to make a quick repair, or you want to redo a room. A business line of credit can be great for expenses like this.

    This is also the best loan for cash flow issues. Cash flow is an issue for many business owners, including B&Bs. There can be many reasons why—lower-than-expected revenue, a need for additional seasonal staff, low margins, and more. If you need help with operational expenses, payroll, and other similar costs, a business line of credit can be an excellent choice.

    And many business owners choose a business line of credit because there is a quick turnaround on approval for qualified candidates without a ton of paperwork. These loans also may be available to businesses as young as six months, which is an advantage over other types of loans.

B&B Financing Alternatives

If you don’t want to take out a traditional business loan for your bed and breakfast, you do have a few other options.

Business Credit Cards

The first we’d encourage you to look at is a business credit card. You may already have a business credit card for expenses like sheets or even food, but business credit cards actually can be used as financing tools for larger projects as well. We’d particularly encourage you to look at 0% introductory APR business credit cards, which enable you to spend without accruing interest for a set period of time. These periods are typically up to one year, which means that you may be able to finance larger initiatives inside your B&B, and then find a way to pay them off before your interest period kicks in. Just make sure you have a plan to pay off your balance before the introductory period ends and a variable APR sets in, or this won’t be a cost effective solution for your business.

Personal Loans for Business

Alternately, you may be able to obtain a personal loan for your business. This kind of loan is based on your personal credit, and can be particularly helpful for new business owners with strong credit scores. You’ll want to note that capital amounts on personal loans for business are quite a bit lower than business loans, and there’s risk involved for you as an individual when you secure your loan against personal collateral.

Financing from Savings

You also have the option to take a loan from your savings—particularly from your 401(k) or other retirement account. This is a tricky topic with lots of pros, cons, and tax implications. But if this is something that piques your interest, you’ll want to take a look at our guide to financing your business from a 401(k) retirement account for more specific information.

Business Loans for B&Bs That Operate Seasonally

Many B&Bs experience high seasons—in the winter by a ski area, maybe; in the spring by a college campus; or in the summer by a lake, for instance—which also means there will be a low season. Business loans for B&Bs can help immensely with expenses incurred in the off season. After all, you still have to pay to keep the lights on even if you don’t have guests in your rooms.

If you’re a seasonal bed and breakfast that’s looking for financing, make sure that you apply toward the end of your high season. There are a few reasons for this. First, you want to make sure you have the capital in hand by the time your steady stream of guests thins out. Next, business lenders look at your bank statements for your revenue and cash flow, so you want to show them your strongest months to give them the most confidence in you as a loan candidate.

Business Loans for B&Bs: Preparing Your Application

You’ll speed up the process of both applying for and getting a decision on your business loan if you gather your paperwork and documentation in advance. Many business loans won’t need much more than what’s listed below. Note that though SBA loans will take a great deal more effort to apply for than many other business loans, you can at least begin with this documentation:

  • Personal identification
  • Three months of business bank statements
  • Profit and loss statement and/or balance sheet
  • Two years of personal and business tax returns

Lenders will pull your credit score, but having a sense of where you fall before lenders do that will enable you to understand which loans you’re most qualified for, and, in turn, what your interest rate may be. You’re able to pull your credit report for free annually from each of the three main reporting bureaus, and you can also sign up for a credit monitoring service to watch your score.

Finding the Best Business Loans for Bed and Breakfasts

Hopefully you’re pleased to see that you have multiple options for business loans for your B&B. Although you may incur lots of expenses as a B&B owner—including potentially buying the B&B in the first place—there are options to secure different types of financing for each scenario.[1]

To set yourself up for approval, it helps to know your financials: your credit score, your business bank account balances, and, of course, the amount of capital you need and can afford to repay. If you’re not sure where to find this info, or how to evaluate it, work with your bookkeeper or accountant to get a clear sense of your finances—and to get on your way with obtaining a business loan.

Meredith Wood
GM, New Markets at NerdWallet

Meredith Wood

Meredith Wood is the founding editor of the Fundera Ledger and a GM at NerdWallet.

Meredith launched the Fundera Ledger in 2014. She has specialized in financial advice for small business owners for almost a decade. Meredith is frequently sought out for her expertise in small business lending and financial management.

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