How to Navigate the Process of Financing a Bed and Breakfast

A woman looking at a computer to learn about financing a bed and breakfast

Innkeeping is about striking the proper balance between financial needs and personal desires. Finding the sweet spot often involves financing a bed and breakfast, and you should understand the ins and outs before beginning this process. Don’t worry, though. Inn Partners has you covered with everything you need to know to navigate it like a pro. 

Read on to discover a wealth of information about how to finance a B&B. Just don’t forget to attend one of our upcoming Seminars for Future Innkeepers to learn even more! We have over 40 years of experience in the hospitality industry, and these seminars allow us to share our expertise with you in a friendly, personal atmosphere. Start your business right with Inn Partners!

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Financing a Bed and Breakfast: The Keys to Success

Assess Your Finances

This is one of the most critical first steps of inn financing. Make sure you assess your own financial standing, especially in relation to the property that you plan to purchase. This is crucial to ensure you get a viable inn at the right price for you. 

Generally speaking, financially viable inns are properties that generate sufficient income to cover operating expenses, debt service (bed and breakfast mortgages), and provide a healthy return on investment. In comparison, lifestyle inns are typically smaller in size and do not generate sufficient income to cover operating expenses and debt service. These inns are commonly priced based upon real estate value, whereas financially viable inns are valued based upon their assets and business activity.

Look in the Right Place

There are several myths about bed and breakfast financing, including the idea that bigger banks provide better loans. That is not the case, especially with smaller inns and B&Bs. Consider the alternatives that offer more personalized service, greater care, and attention to detail. Small banks are more likely to work with you and the Small Business Administration (SBA) to offer loan programs that are profitable for both parties. It’s a win-win!

Create a Plan

So, you’ve found your ideal B&B, put your finances in order, and chosen the bank you intend to request a loan from. Before you contact the bank, we recommend creating your own business plan. You shouldn’t ask the bank what they will offer you — put your own business plan together first, and then tell the bank. This helps ensure your needs are met and streamlines the loan process.

Notes: Most lenders require an investment between 20% – 30% of the sale price, including the down payment, closing costs, working capital, and reserves. Also, the financing piece often takes between 45 to 60 days, if it takes the form of a conventional loan from a local bank or national lender.

Contact Inn Partners

People at a seminar about financing a bed and breakfast

You’re officially one step closer to financing your bed and breakfast! Now, we’d like to invite you to attend an upcoming Seminar for Future Innkeepers. You’ll discover even more tips and industry secrets about the buying process from our team of experts that has over 40 years of experience and has helped sell over 450 hospitality properties in North America and beyond. Plus, we’re happy to offer consulting services and guide you through creative financing options. Simply put, we’re here for you. Get started with Inn Partners today!

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