Airbnb Loans: Small Business Financing for Airbnb Hosts
In the first three months of 2021, Airbnb has already generated an incredible $887 million in revenue. While that number is high, analysts predict this number to reach $5.4 billion by the end of the year. There is no doubt that Airbnb rentals are a profitable business, with more people realizing the importance of having a side income.
Unfortunately, not everyone has the capital required to purchase additional property or renovate an existing room. While not having enough funds could be a problem in some cases, online lenders have made it a lot easier for people to acquire a loan. This article gives an overview of how to obtain Airbnb financing.
Compare the Top Small Business Loan for Airbnb
Choosing the right Airbnb loan depends on whether you meet the minimum requirements to apply for a loan. It is also important to consider whether you will be paying an interest rate or factor rate because this can impact how quickly you decide to pay back the borrowed amount. The table below includes an overview of 5 top business loans you can use to finance your Airbnb business.
Min. Credit Score
Merchant cash advance
Factor Rate: 1.1-1.9
Line of credit
4.66% - 8.99%
4% - 13%
Merchant cash advance
Up to $400k
Factor Rate: 1.15-1.45
Line of credit
The Best Small Business Loans for Airbnb Explained
The table above highlights the best loans suited for Airbnb financing and includes a general overview of what can be expected when applying for a loan through each of these providers. In the following discussion, we will go into a detailed overview of each lender so you can decide which loan is best suited for your investment property.
Fora Financial is a working capital provider that offers loans to small businesses. This lender has been around since 2008 and has delivered over $2 billion in loans to 25,000 small businesses. When working with Fora Financial, you have the option to fund your Airbnb with a small business loan or merchant cash advance.
Fora Financial Features
|Credit score requirements||Fora Financial does not disclose any information on their website about the minimum credit score they require. However, you are more likely to be approved with a credit score as low as 500|
|Payouts||Once you have been approved for a loan, you can expect to receive your money within 72 hours|
|Payoff discounts||You can receive a 10% to 30% discount if you pay your loan off early. However, not all businesses qualify for this discount|
|Collateral||Fora Financial doesn't require collateral. This means there is less risk when it comes to your business assets, but the lender can still come after your personal assets if you fail to pay back the loan|
|Time in business|
Can't be less than six months in business- Fora Financial also requires a minimum of $12,000 in gross sales.
Owning an Airbnb means your rental isn't also occupied, which means money isn’t coming in daily. You will have to make provision for daily repayments with a Fora Financial loan.
Fundbox is a financial service platform and has been around since 2013. This company has helped over 275,000 customers acquire loans for their small business, with over 70% of their customers using them on more than one occasion.
|Credit score requirements|
To qualify for a Fundbox loan, you need a minimum credit score of 600.
|Application process||Your application will be processed once you have provided information about your business and credit reports. If not, Fundbox lets you know if they require more time for processing.|
|Early repayment discount||If you pay the outstanding amount in full before the end of your term, Fundbox will waiver the remaining fees|
|Annual revenue required||Fundbox requires $100,000 annual revenue. If you are a first-time Airbnb investor, this might not be the best option for you. Fundbox does say that this isn't a necessity, but it will improve your chances of being improved.|
|Repayment||Fundbox provides 12 to 24 weeks of repayment. This could put you under a bit of pressure when funding your Airbnb, as you will need to make payments in full within 3 to 6 months|
Running an Airbnb comes with the costs of furnishing, cleaning services, maintenance, and renovations. Fundbox is an attractive choice for a loan if you are looking for a line of credit to help maintain your Airbnb. Read the full Fundbox review for more details.
Fundera is a digital marketplace that helps small businesses find the best loans to help them reach their financial goals and growth potential. Fundera has been around since 2013 and has helped over 85,000 companies with over $2,5 Billion in loans.
|Loan types||Fundera offers a wide variety of loans, including SBA loans, short-term loans, invoice financing, equipment financing, merchant cash advances, and lines of credit|
|Loan amounts||Fundera has lenders that offer loan amounts as high as $5 million|
|Application process||When you file a Fundera application, they will only prompt one soft inquiry. This means you don't have to worry about your credit score being affected|
|Interest rates||Depending on which loan you choose and the lender Fundera has matched you with, you can have interest rates ranging from 3% to 150% APR.|
If you are not sure which loan is best suited for your Airbnb financing, then Fundera is the best option, with a variety of different loans to choose from. Fundera makes it easy for your business to match with the right lender while also providing excellent customer service. Read the full Fundera review for more details.
Credibly is an online lender that has been around since 2010 and has helped over 19,000 small and medium businesses acquire loans. With over $1 billion in loans, Credibly prides itself in assisting companies in reaching their full potential.
|Credit score requirements||Credibly require you to have a credit score of 500 or higher|
Credibly offer several different loans to choose from, including a working capital loan, long-term business loan, line of credit, SBA loan, merchant cash advance, and invoice factoring.
|Repayment discount||Credibly offer a discount if you put down a large amount of money, but this is reviewed on a case-to-case basis|
|Approval requirements||To be considered for a Credibly loan, you will have to be in business for longer than six months and have average monthly revenue of $15,000 per month.|
|Daily repayments||Credibly offers the option to make daily or weekly repayments.|
Read the full Credibly review for more details.
BlueVine is an online lending service that provides loans to small businesses. Even though they have only been around since 2013, they have already funded $14 billion to over 450,000 business owners.
Owning an Airbnb can come with unexpected maintenance problems, and if you don't plan for these unexpected events, you might find yourself struggling to pull funds together. Fortunately, the BlueVine application is fast and quick, and you can expect to receive capital within 12-24 hours after approval.
|Loan amounts||BlueVine offers loans up to $250,000 with a 6 - 12 month loan term.|
|Application process||According to BlueVine, if you have all the required documents in place, you can get approved within 5 minutes.|
If you have a credit score of 600, your business will need an annual revenue of $200,000. However, if your credit score is 650 or higher, your annual revenue can be around $60,000.
|APR rates||If you decided to apply for a line of credit with BlueVine, you could expect an APR anywhere from 15% - 78%.|
If you need capital and you need it quickly, BlueVine is a good choice. The only setback is the high requirements needed to take out a line of credit. This might not be the best option if you are a first-time Airbnb owner. Read the full BlueVine review for more details.
What To Consider Before Buying An Airbnb Property
Airbnb rentals have become globally popular, with tourists preferring them over hotels. Still, your success isn’t guaranteed. Here are a few things to consider before purchasing:
- Reputation: Airbnb’s success relies heavily on host involvement with guests. Online reviews can make or break your Airbnb business.
- Maintenance: Will you be able to handle the constant cleaning and maintenance of your property? Or do you have the resources to hire a property manager?
- Location: You might find a beautiful property, but if it’s not in the right location, you won’t have many bookings. Before purchasing an Airbnb property, do your homework. Check for amenities for tourists such as restaurants, entertainment, public transportation, and more
- Legality & Taxes: Due to the popularity of Airbnb and pressure from the hotel industry, some cities have created burdensome regulations for short-term rental properties. Check with the municipality to learn about regulations, licensing, and tax requirements before investing in the property
- Airbnb Rental Income: Airbnb income can vary from month to month. According to research, the average Airbnb host earns around $924 a month. Keep in mind that you will more likely earn a larger income in peak seasons than during the off-season. You will need to make provision for mortgage payments, maintenance fees, and other expenses during the off-seasons.
- Airbnb Occupancy: The number of nights your Airbnb is booked vs. the number of days available will give you an occupancy rate. A good rate depends on the real estate market, the time of year, and your listing position in the Airbnb market. The occupancy rate helps determine how successful your Airbnb will be.
- Capitalization Rate: The CAP rate is a metric used to measure investment return on your rental property. You can calculate this rate by dividing your Airbnb's net operating income by the current market value.
- FICO Score: This score will help lenders determine how likely you are to pay back a loan. A good FICO score is 670 and up. If your score is lower, don't let it deter you from investing in Airbnb since many lenders will still assist you even with a 500 credit score.
Airbnb Loans FAQs
- Does Airbnb Count as a Small Business? Since you are actively managing the rental and offering a service in exchange for money, you are technically running a self-employed business. You can also set up an LLC, which is recommended to help keep your personal and business assets separate.
- Can an Airbnb Host Get a PPP Loan? If you rent out a part of your home or a secondary property on Airbnb, you can qualify for a PPP loan. Unfortunately, there have been many Airbnb hosts being denied this loan.
- Can you Get a Business Loan for Airbnb? Yes, there are many loans available to supplement your Airbnb including, line of credit, SBA loans, merchant cash advance, and general small business loans.
- Can you get an SBA loan for a rental property? Yes, an SBA is an attractive loan for many real estate investors since it generally has lower interest rates than other loans, and you have an extended time to pay them off.
Airbnb hosting continues to be a successful way to earn a side income. Some hosts have turned it into a full-time business. Much of the success depends on you. Before getting started, carefully consider all the financing options and local regulations before you make an Airbnb property investment.