All Bed & Breakfast/Inns are unique by design; in fact it is that unique quality that separates one B & B from the next.  Innkeepers invest their energy and capital over time to create a welcoming and hospitable environment that is unique to their community and valued guests.  Each financing is unique as well, so your individual circumstances i.e. credit financials and investment objectives  need to be analyzed  and considered relative to what financing programs best fit your investment objectives and your particular property.

While the charm and ambiance of an inn add to a patron’s experience, such intangibles have only an indirect effect on the actual value. An inn’s market value is ultimately determined by combining the values of the real estate, cash flow and sometimes furniture, fixtures & equipment (FF&E).  The appraised value will be used to determine the actual loan-to-value of the property.  Appraisal fees range from $2,400 to $4,000 depending on the nature of the property and customary charges in a given geographical area.

Credit Scores are extremely important to a lender in evaluating the merits of a loan. Your credit (or FICO) scores have a direct impact on the rate, term and loan program you for which you qualify.

Note: Individual lender guidelines may vary. The credit tier examples listed above are only for general information purposes. For a copy of our Credit Guide, please visit our web site at: www.bedandbreakfastfinancing.com.

Banks commonly take an interest in business ventures within their defined trade area, provided the financials support the contemplated level of debt service.  A bank’s ability to lend on properties that do not cash flow the debt service on their own is often restricted.  The FDIC, which insures bank deposits, regulates lending policies and generally requires the entity borrowing the money to repay the debit based on the cash flow from the primary asset. To strengthen a loan request, the bank may seek additional collateral and they generally require that the borrower provide updated financials each year so they can monitor the ongoing financial health of the business.  This requirement becomes an issue only when the required Debt Service Coverage Ratio falls below an acceptable pre-determined level; failure to maintain this ratio may cause the bank to call the loan. 

Banks often like to re-set rates from 3 to 5 years—and sometimes even annually; depending on the direction interest rates are heading at the time, this may or may not be an advantage for the borrower.   More often than not, amortizations are limited to 20 years or less and most banks will want to know the intended use of the loan proceeds.

Non-Bank Lenders like Commercial Capital Network (CCN) offer a wide variety of loan solutions to owners who were considered previously to be un-bankable. Conventional/Full Doc Programs are available with LTV to 90% and fixed rates from 2 to 30 years. All sources of income may be considered to offset shortfalls in the business’s cash flow including: W2 or 1099 income from any partner, investment income, Social Security, Disability, etc.

Annual financial statements are NOT required and loans are often assumable, which depending on interest rates at the time you decide to market your B & B/Inn may be a big benefit to both you and your buyer.

Conventional “Full Doc” Loan Program Highlights

• Income from all sources considered to qualify

• 2 Years Business/Personal tax returns required

• Unrestricted Cash-Out Refinances

• Pre-Approvals in 48 Hours

• Closings in as few as 45 days

• Amortization terms up to 30 years

• Loan Amounts to 90% LTV

• Yearly Financials are not required

• Loans may be assumed

Stated “No Doc” Loan Programs are also available for refinance with LTV as high as 85%.  These programs are quick and well suited for Innkeepers who are unable to fully document their income, or where income from all sources is inadequate to qualify for the loan.

Stated/”NO Doc” Loan Program Highlights

• Tax returns may not be required

• Unrestricted Cash-Out Re-finances

• Pre-Approvals in 48 Hours

• Closings in as few as 45 days

• Loan terms up to 30 years

• Loan Amounts to 85% of value (LTV)

• Yearly Financials are not required

• Loans may be assumed