B&B Loans: Best Business Loans for Bed and Breakfasts

Bed and breakfasts tend to be seasonal businesses with occupancy fluctuating from month to month. With such unpredictability, it can be difficult to ensure expenses are covered throughout the year. The good news is there are many lenders offering small business loans to help B&Bs stay in operation despite their reduced cash flow.

This article will teach you everything you need to know about how to finance your bed and breakfast, you’ll learn about how to use B&B loans, available loan types, and what criteria to use to select the best loan for your B&B. 

Finding the best bed and breakfast financing takes a bit of research. You must spend time evaluating the various options to find one that best matches your needs. 

In this review our experts highlight the rates, fees and terms of each lender and explain what makes them a good option. We also share potential downsides of each lender, and provide a rating methodology you can use to select the best option for your needs.

Best B&B Businesses Loans for 2023 - Full Overview 

Here’s an in-depth look at some of the best lenders for B&B loans. 

How to Choose the Best Bed and Breakfast Businesses Loan

• Loan features: It’s important to evaluate your B&B loan options by comparing the features of each loan—including loan terms, repayment options, and loan amounts—to your needs.
• Application process: Take note of how difficult, invasive, and fast the loan application process is. Will you be able to prequalify with a soft credit pull that won’t harm your credit score? How long will it take for approval?
• Interest rates and fees: Some of the loan fees you might incur include application fees, loan origination fees, monthly service fees, prepayment penalties, late payment fees, payment protection insurance, and charges for non-sufficient funds.
• Qualification process: Make note of the qualification process, including the minimum credit score, annual revenue needed, and business history requirements
• Customer support: The best lenders offer live customer service reps who can be reached through multiple communication channels, including online chat, phone, and email.
• Online user reviews: Take time to look through reviewson independent sites like Trustpilot.
• Perks and bonuses: Also look for additional perks and bonuses such as payment flexibility, advanced technology, small business education opportunities, and advertising transparency. 
   

What Are the Costs of Running a B&B Business?

Running a B&B business can be an incredibly rewarding experience, but it’s not without its costs. Here’s a rundown of what you should expect to spend while operating your bed and breakfast. 

• Initial costs: If you don’t already own the home you want to convert into a bed and breakfast, you’ll need to invest in one. The cost of the property will vary depending on its size, location, and condition but you can expect to spend anywhere from $200,000 to $1 million or more. 
• Renovations: Once you’ve acquired your property, you’ll need to invest in renovations to get it ready for guests. Common renovations include bringing the plumbing and electricity up to code, expanding the dining area, building a commercial-grade kitchen, installing a security system, and updating bathrooms. These renovations can range anywhere from $5,000 to $50,000 and up.
• Licenses and insurance: You’ll need to register as a legal business then obtain the proper licenses, permits, and insurance before you open up for guests. The exact requirements and costs will vary by location, but these expenses could add up to several thousand dollars. 
• Bedding: Each guest room will need new mattresses, bedding, pillows, and towels which can run you up to $1,000 per room.
• Food: Your food costs will depend on what type of meals you serve and how many you offer per day, but you can typically expect to spend at least $7 per guest for each meal. 
• Marketing: If you want to attract guests, you’ll need to set up a website and actively market your bed and breakfast. Initial web site setup could cost a couple thousand dollars with monthly marketing costs reaching approximately $500 per month.

How Can You Use Bed and Breakfast Business Loans?

While some lenders may have strict rules about loan usage, most allow bed and breakfast owners to use loans in whatever way they wish. Here are a few examples of how bed and breakfast financing can be used.

• Additional space: You can use bed and breakfast business loans to add rooms to your home, expand outdoor seating, or enlarge dining and lounge areas.
• Interior upgrades: Loans for a bed and breakfast can also be used to paint the interior, add wallpaper, install new flooring, or purchase new furniture.
• Kitchen remodel: Another popular option is to use bed and breakfast financing to remodel the home’s kitchen and bring it up to code. 
• Security improvements: Loans can also be used for security improvements like a key card entry system, smoke alarms, and fire alarms. 
• Day-to-day operations: Loans don’t have to have to be applied toward special investments—you can use them to cover the cost of day-to-day operations, especially during the off-season.

How to Qualify for a B&B Business Loan?

Learn About Various Loan Options

Take some time to educate yourself on the different kinds of loans that are available to bed and breakfast owners, including working capital loans, microloans, lines of credit, etc.

Build And Maintain Your Credit

To qualify for a wider range of loans and get the best loan terms possible, do all you can to raise your credit score and keep it in the “fair” range or above (580+).

Prepare Your Documents in Advance

Make sure you have all the necessary documentation available, including your business plan, bank statements, business license, income statements, balance sheets, cash flow statements, and statements of capital.

Know How Much You Need to Borrow

Determine how much you need to borrow before applying for bed and breakfast business loans. If you’re using the money to purchase equipment, such as baking equipment, or make renovations, be sure to get estimates in advance.

Decide What Type of Loan You Need

Spend some time evaluating your options before choosing bed and breakfast financing. For example, if you only need to borrow a small amount, focus on lenders offering microloans. If you need a quick infusion of cash to cover unexpected repairs, look into short-term loans.

Apply Only for Loans That Match Your Qualifications

Don’t waste your time applying to lenders if you don’t meet their qualifications. Check the requirements in advance to improve your odds of getting approved for a B&B loan.

Conclusion

Running a bed and breakfast comes with a unique set of challenges. Because occupancy rates fluctuate throughout the year, it can be hard to predict your cash flow and pay for unexpected expenses, especially during the off-season. The good news is you don’t have to worry about how to finance your bed and breakfast and keep it operational—there are many lenders willing to offer help when you need it.

*The required FICO score may be higher based on your relationship with American Express, credit history, and other factors.