How do you finance a Bed & Breakfast?

The best resource for financing a bed & breakfast purchase is a lender that is present in the local community. I asked a local lender for the key points to financing a bed & breakfast. Keep in mind that we are talking about a commercial mortgage.

Here are the key points:
· A 20% down payment will be needed.

· The lender will order an appraisal on the property. The lender will usually offer a 80% loan-to-value on the sales agreement (sale price stated in the agreement of sale) or if the appraisal is less than the sales agreement they go with the lesser amount; if the appraisal comes in higher than the sales agreement, then the lender does 80% off the sales agreement);

· Business plan by the purchaser;

· Contents (ie. Furniture, appliances, etc.), if the furniture, fixtures and equipment are included in the sale (which they most often are) the lender usually does a separate loan from the real estate purchase. It is important to establish a sale price for the real estate and a separate amount for the contents in the agreement of sale;

· Obtain the past 3 years of financials on the B&B being purchased and from the individuals who are looking to purchase the B&B; If the income from the B&B isn’t sufficient to cover the loan request, they will then need to see if there is outside income that can be added in (ie. wife/husband has outside employment and not just depending on the income of the B&B).

These are the key points to financing a B&B. More than half of B&B's have one partner working outside of the inn. This is normal. A B&B does not have to be making tons of money to obtain a mortgage. However, the lender will need to document another source of income to pull the loan together.

I am happy to refer you to a local lender who is experienced in financing B&B's... Just contact me.