The hardest part of any start-up is getting the finance; this also applies to those individuals that have their heart and soul set on starting up a B & B.
Applying for a loan from the bank is usually the first stop in most instances:
- The best and easiest way to find financing for a B & B is to convert your existing home into a B & B establishment and by applying for a second bond that holds your existing home to do this.
- If you have a good credit record, there should be no problem in raising the money to proceed with these plans through a commercial bank.
- When it comes down to funding there are certain criteria that banks look for – they often include the ability for you to make a 50% contribution of your own funds to the amount required and to repay the loan over a period of five to ten years.
You need to be able to align your business to the target market – if you are targeting business travellers, for example, the B & B needs to be easily accessible to high traffic business volumes and easy accessibility.
If you struggle to raise funds through the usual banking institutions, there are other ways and means to raise these funds for your startup business.
Friends and Family:
- One good thing about borrowing money from individuals that are close to you is that you might benefit from a very low interest rate.
- When it come to paying back the loan, you should be able to make good on your undertakings.
- If it does for whatever reason, take a bit longer to pay back the loan than expected, and even though they are family or friends, they will become unhappy if the payments are late.
- Borrowing from friends and family could tarnish relationships and some might even become a little too interested in the business.
- As long as all the parties involved understand the risks right from the beginning, this can be a good way to get started.
Should the two above attempts fail at finding the funding to start the business of your dreams, other options could include development organisations and private financing.
Never over-extend yourself when you start-up, and try to do as much as you are able to from your very own pocket. For example, Business Partners will not finance any B & B’s until they have the correct business insurance cover, the correct licenses and are zoned accurately.