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Small Business and SBA Lending Blog
Last updated on Feb 19, 2023
2 min read

Using the SBA 7(a) Loan for a Bed and Breakfast

Like much of the rest of the U.S. economy, the bed and breakfast (B&B) and hostel accommodations industry  has experienced a rebound. The fully recovered unemployment rate means more expendable income for Americans, and more money within the reach of small business owners.

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Like much of the rest of the U.S. economy, the bed and breakfast (B&B) and hostel accommodations industry has experienced a rebound. It's projected to continue to grow through 2020. The fully recovered unemployment rate means more expendable income for Americans, and more money within the reach of small business owners.

Banks and other lending institutions are willing to approve loans for B&B owners, and the SBA 7(a) loan is a great choice for taking on a business mortgage. The loan is versatile, terms are straightforward, and eligibility is attainable by business owners.

Here’s a look at some of the things you can do with the SBA 7(a) loan:

  • New construction of a B&B facility. Building a new B&B can be expensive, but any of the costs can be covered by the SBA 7(a).

  • Refinancing a bed and breakfast. The funds from the SBA 7(a) can be used to refinance an existing loan. There are specific conditions for the loan to be used this way; for more information, check out our page on Refinancing Debt.

  • Buying an existing building. You may find it cheaper to buy a vacant site rather than to build. The SBA 7(a) loan allows for the purchase of commercial real estate and land.

SBA7a.Loans works with business owners on other government-backed loan programs as well. The SBA 504 is another loan that's larger than the SBA 7(a). The 504 loan often has more favorable terms than the 7(a), including a lower down payments and interest rates. Typically, SBA 504 loans are used with a traditional loan, with the costs split between the two.

To learn more about the SBA 7(a) loan program or to get a free quote, simply click the button below!

Related Questions

What are the eligibility requirements for an SBA 7(a) loan for a bed and breakfast?

The eligibility requirements for an SBA 7(a) loan for a bed and breakfast are the same as for any other business. The business must be a for-profit, small business operating in the United States, and the owner must have a good credit history and sufficient collateral. Additionally, the business must meet the SBA's size standards, which vary by industry. You can find more information about size standards here.

The SBA 7(a) loan can be used for any related needs such as acquiring, refinancing, constructing or renovating, property investment, partner buyout, and even loan consolidation. However, it’s important to realize that SBA 7(a) loans cannot be used for working capital. You may want to consider getting an SBA express loan or SBA microloan instead.

What are the advantages of using an SBA 7(a) loan for a bed and breakfast?

The main advantage of using an SBA 7(a) loan for a bed and breakfast is that it can provide working capital. This is not something that an SBA 504 loan can do. An SBA 7(a) loan can also provide up to $5 million in financing for a variety of business needs, including purchasing real estate, constructing or renovating the building, and buying equipment. Additionally, SBA 7(a) loans have flexible terms and competitive interest rates.

For more information, please visit https://sba7a.loans and /compare-sba-loans.

What are the disadvantages of using an SBA 7(a) loan for a bed and breakfast?

The disadvantages of using an SBA 7(a) loan for a bed and breakfast include:

  • Lengthy approval times (for standard SBA 7(a) loans)
  • Lots of documentation
  • Collateral is often required
  • Certain businesses, including real estate investing, lending, gambling, and speculation are prohibited
  • High credit scores are typically required (typically 680+)
  • May be restrictions on supplemental/additional financing

Source: What are the Pros and Cons of SBA 7(a) Loans?

What are the maximum loan amounts available for an SBA 7(a) loan for a bed and breakfast?

The maximum loan amount for an SBA 7(a) loan for a bed and breakfast is $5 million. This loan can be used for real estate and land loans for new construction or for the purchase of existing buildings, with a maturity of no more than 25 years. Equipment and working capital loans have a loan term of 10 years.

Sources:

  • SBA 504 Loans for Bed and Breakfasts
  • Getting a Business Mortgage for a Hotel

What are the repayment terms for an SBA 7(a) loan for a bed and breakfast?

The repayment terms for an SBA 7(a) loan for a bed and breakfast depend on the loan amount and the lender. Generally, the repayment term for an SBA 7(a) loan is up to 10 years for working capital and up to 25 years for real estate and equipment purchases. The SBA 7(a) loan interest rate is typically based on the prime rate plus a margin, and the current interest rate is around 5%.

For more information, please visit https://sba7a.loans and https://sba504.loans/sba-504-blog/sba-504-loans-for-bed-and-breakfasts.

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