Getting a Loan for a Travel Agency
The role of travel agents has changed quite a bit as travel booking has moved online—more than ever, your expertise is what sets you apart and can help people get the most out of their experiences in far-flung destinations. For many, that means finding a business loan for travel agencies to help you update your services, modernize your office space, or bring on new talent to reach new customers. Or maybe something else entirely… there are lots of possibilities.
No matter what you need a travel agency business loan for, you’ll find lots of options to help you accomplish the goals that you have for your company—both now and in the future. We’ll review some hand-picked options to find business capital, then help you understand how the loan process works as well as which documents you’ll need to apply for a business loan.
The Best Business Loans for Travel Agencies
Let’s dive straight into the best business loans for travel agencies. There are lots of different types of business loans that you can consider, and many will be good for travel agencies. But the options we’ve listed below have been chosen with travel agencies in mind—they’re great for things such as paying for overhead, making renovations, and investing in opportunities, for instance.
Best Travel Agency Business Loan: SBA Loans
Let’s begin with SBA loans. These loans are widely considered the most desirable loans available due to their favorable terms: high capital amounts, long repayment periods, and low interest rates. Lenders, generally banks, are able to offer such excellent terms because these loans are backed by the U.S. Small Business Administration. That means that in case borrowers aren’t able to pay their loans back, the banks aren’t on the line for 100% of the lost capital, which means they have less risk. And less risk for them means better terms for you on these loans, which are structured as either lump-sum “traditional” loans or lines of credit (more on that below).
As you might expect, though, lots of borrowers want these great terms, which means that these loans are competitive—both for travel agencies and other businesses alike. Although there’s no minimum credit score to technically qualify for these loans, you’ll want to have strong credit to be considered, as well as a good track record in business so far (that doesn’t mean profitability necessarily, but it does mean no startups). These loans are great for purchasing large fixed assets such as real estate and buildings as well as working capital, which allows your travel agency flexibility to spend. Popular SBA programs to look into are SBA 7(a) loans and SBA 504/CDC loans.
Also important to know about SBA loans: the SBA loan application process is much longer than many other types of business loans. There’s a lot of paperwork involved, including both your financial documents as well as forms specific to SBA loans. In other words: If you need cash quick, you’ll want to seek some alternatives.
Best Alternative to SBA Loans for Travel Agencies: Term Loans
If you like the sound of SBA loans but you either don’t have the time or the financial profile to qualify for one, you’ll feel good to know that you have alternatives. Both of the business term loans we’ll detail below are loans in which a lump sum of capital is deposited in your business bank account after approval. They both have set repayment terms, and you must pay interest on the full amount of the loan. You can also apply to both of these types of business term loans fairly quickly, with minimal paperwork, and receive a decision quickly.
Medium-Term Business Loans
Medium-term business loans are a strong choice for travel agencies that want to invest in things such as upgrades, get new equipment, or otherwise want general flexible working capital to spend. In general, these loans have repayment terms of about three to five years, with repayments monthly.
Short-Term Business Loans
Similar to medium-term business loans are short-term business loans, whose biggest difference—as their name implies—is their repayment terms. Terms are shorter—generally three to 18 months—and repayment is either weekly or daily. This can be a bit more expensive than longer-term loans, but short-term business loans tend to come in handy for businesses that need capital quickly for emergencies or short-lead expenses.
Best Flexible Business Loans for Travel Agencies: Business Line of Credit
The ability to flexibly use capital is key for many small business owners who seek out business loans. In this case, a business line of credit is almost always worth considering, since this type of business loan is among the most flexible there is. And if you have a credit card, you are probably already familiar with the basic concept of how it works.
With a business line of credit, you work with a lender to get approval for a credit line, which you then “draw” against as you need money. You don’t have to use the whole credit line, rather just what you find you need to spend. If this sounds like that credit card we mentioned, you’re right. The difference generally is that you can receive cash in your business bank account instead of spending on a card; additionally, credit lines are higher and interest rates are generally lower than you’d find with a credit card. The biggest benefit with a business line of credit is that you’re only paying interest on what you use—and you can generally access the full capital amount to spend again once your draw is paid off.
You may find that the things you want to finance pop up incrementally, which is why a business line of credit could be a strong contender for you—you only have to use it as you need it. Another particularly great use for a business lines of credit is for cash flow issues: for instance, if you have a hard time covering overhead or making payroll one month, you can lean on this kind of loan to help you through a cash crunch. For this reason, it’s also a great help to many seasonal businesses like travel agencies.
Best Travel Agency Business Loan Alternative: 0% Intro APR Credit Card
It’s also worth mentioning business credit cards. Although you might have a business credit card already, do you know how to use it as a helpful financing tool?
Many travel agencies might find that a 0% introductory APR business credit card is actually exactly what they’re looking for. These cards enable entrepreneurs to spend on their card with an interest-free period, which, in some cases, can last for about a year. This means that during this predetermined period (set by the credit card company), you don’t have to worry about accruing extra fees on unpaid balances, and you can also make a plan to pay back your expenses by the end of the interest-free period.
You’ll want to do this carefully, of course—a variable APR will set in once the intro period is over, so paying off your balance before then is key. But many companies strategically take advantage of 0% intro APR business credit cards to either help in a pinch, or kick-start their businesses entirely.
Of all of the types of business loans we’ve covered today, you will likely find that you can get the fastest approval for a 0% intro APR credit card if you’re qualified. So, if speed is a consideration, don’t rule out this type of business financing.
How to Pick the Best Business Loan for Your Travel Agency
We’ve reviewed several different types of business loans for travel agencies. And some of them may seem like the right pick for your needs—but how do you know, exactly, if you have your eye on the right one? Here’s what to look out for.
Knowing What You Need in a Business Loan
First and foremost, as you’re evaluating your options for business loans, you want to keep in mind what you’re trying to accomplish with the capital infusion. Is there a specific project or expense you need to finance, or are you just hoping to get more cash in the door to take care of a bunch of different costs? Whether or not you have a specific project in mind will help you understand how flexible your capital needs to be, as well as whether you need a whole lump sum at once.
Next, how fast do you need the money? As we mentioned above, some loans are very fast to funding—within a single day, even—whereas others take a few months due to their intensive application process. If you need to finance something ASAP, for instance, an SBA loan wouldn’t be a fit; however, if you’re planning to do an expansion or renovation, you might have the time to apply for a loan that doesn’t have as quick of a turnaround if it means better terms.
Finally, how strong is your financial profile? This is one piece of the business loan application process that determines your options most directly—regardless of the type of loan that you want. If you haven’t been in business long or don’t have a strong credit score, for instance, you will likely find your options more limited than if you’ve been generating revenue for a while and paying your bills on time. Your rates and terms will also be affected by this. The loan representative with whom you work will be able to detail what requirements you do and don’t satisfy, but going in with a general understanding of your financial standing and whether or not it matches what you’re looking for in a loan can help you get a head start on the process.
Applying for a Travel Agency Business Loan
The business loan requirements you’ll need to meet will vary depending on both the type of loan you’re applying for as well as the lender with whom you work. They’ll give you specifics on what kind of documentation to pull. But, if you’d like to get the process started in advance (which can help you speed up your approval timeline), here are some documents you should pull:
- Personal identification
- Three or four months of business bank statements
- Two years of business and personal tax returns
- Profit and loss statement
- Balance sheet
Again, some lenders might ask for more or different paperwork, but these are helpful to have prepared. Work with your bookkeeper or accountant to locate anything you’re not sure where to find.
The Bottom Line
There are lots of different expenses involved in running and growing a travel agency. Hopefully, though, you’ll see that you have many business loans for travel agency options that can help you afford those expenses and accomplish exactly what you’re looking for.
As you’re searching, remember that the loan that might seem like the most desirable isn’t necessarily the best fit for what you need to do with the money. Keep your goals front of mind in order to find the business capital that’s right for your travel agency.