Operating an Airbnb property can be an extremely lucrative business venture, but it requires significant upfront investment. As an aspiring Airbnb host, one of the biggest challenges is finding the funding to purchase and prepare your vacation rental property. That’s where small business loans can make all the difference.
In this comprehensive guide, I’ll walk you through everything you need to know about getting a business loan to start your Airbnb empire.
What is a Business Loan for Airbnb?
A business loan for Airbnb refers to financing obtained by an investor or entrepreneur to purchase and operate a short-term rental property listed on Airbnb and other vacation rental platforms
Unlike personal loans, business loans allow you to use the funds solely for business purposes. The loan application and approval process is also tailored to evaluate the profitability of your Airbnb business idea rather than just your personal creditworthiness.
Business loans offer vital capital to cover major costs like:
- Down payment on an Airbnb investment property
- Renovations and repairs
- Furnishing and decorating
- Marketing expenses
- Property management fees
- Recurring bills and emergency costs
With the influx of cash from a business loan, you can get your vacation rental business up and running quickly while retaining ownership over your property.
Top 6 Types of Business Loans for Airbnb
If you’ve weighed the risks and are ready to finance your Airbnb property, you have several business loan options to choose from:
1. SBA 7(a) Loans
The Small Business Administration’s 7(a) loan program offers loan amounts up to $5 million and is one of the most accessible small business loan programs. 7(a) loans can be used for purchasing, renovating, or expanding a short-term rental property.
2. SBA 504 Loans
SBA 504 loans provide up to $5 million for major fixed assets like land and buildings. Having 20% down is required. 504 loans feature low down payments and long repayment terms.
3. Conventional Small Business Loans
These loans from banks and alternative lenders provide $50,000 to several million. Shorter terms require faster repayment, while longer 5-10 year loans have higher rates.
4. Equipment Financing
Financing for furnishings, appliances, smart home devices, and other equipment Flexible terms of 2 to 7 years and easy application process
5. Medium-Term Loans
These 3 to 5 year loan terms offer faster financing at higher costs. Medium business loans work for quick renovations prior to listing your property.
6. Short-Term/Bridge Loans
Bridge loans provide fast financing for a few months to a year. Costs are higher but they offer flexibility for short term needs like Airbnb repairs.
7 Key Tips for Getting an Airbnb Business Loan
Follow these tips when seeking funding for your vacation rental property:
1. Check your credit
Lenders will thoroughly evaluate your business and personal credit history. Aim for a score above 680.
2. Create a business plan
A detailed plan shows lenders you’re serious and thinking long-term. Include financial projections.
3. Get your paperwork in order
Have business registration, tax returns, property details, and income statements ready.
4. Know your numbers
Analyze all costs and crunch the numbers on your expected revenue and profits.
5. Prepare for upfront costs
Closing costs average 2-5% of the loan amount. Factor these into your budget.
6. Explore SBA loans
SBA loans offer favorable rates and long repayment terms for small businesses.
7. Talk to multiple lenders
Compare loan products, rates, and terms across banks, credit unions, and alternative lenders.
Top 5 Lenders for Airbnb Business Loans
I recommend starting your search for small business financing with these top lenders:
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Lendio – Marketplace of business loans from 75+ lenders. Fast approvals and funding.
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Fundera – #1 lender marketplace. Connects you with affordable SBA 7(a) and 504 loans.
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LendingClub – Well-known marketplace with competitive rates and terms.
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Kabbage – Leading fintech lender with quick online applications and funding.
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Credibility Capital – Alternative lender with strong reputation and customer service.
What Information Lenders Require
When applying for an Airbnb business loan, come prepared with these documents:
- Business plan with financial projections
- Personal and business tax returns
- Personal and business bank statements
- Business formation documents
- Property appraisal or purchase agreement
- Proof of property zoning compliance
- Vacation rental income history (if applicable)
- Listings on Airbnb, Vrbo, etc. showing potential income
- Brokerage or property management agreement
- Quotes and estimates for renovations
- Insurance documentation
Steps to Getting Approved for an Airbnb Business Loan
Follow this step-by-step process for securing an Airbnb business loan:
1. Choose a business structure – Form an LLC or corporation to separate personal and business finances.
2. Build your business credit – Apply for an EIN, open business bank accounts, etc.
3. Find the right property – Use AirDNA or Mashvisor to identify profitable listings.
4. Research regulations – Ensure short term rentals are legal and any permits required.
5. Create a business plan – Outline your venture’s objectives, finances, marketing plan, etc.
6. Get prequalified – Talk to lenders to get preapproved and compare loan options.
7. Submit your full application – Compile all required documents and complete the full application.
8. Endure the underwriting process – Be responsive as the lender verifies application information.
9. Close the loan – The lender will extend a formal loan offer. Review terms and close once approved.
10. Funds dispersed – Loan proceeds direct deposited 1 to 5 business days after closing.
scenario: Purchasing your First Airbnb Property
As a first time Airbnb investor, securing a business loan can provide the capital to purchase your very first vacation rental property. Here is an example scenario:
Taylor dreams of quitting her 9 to 5 job and running Airbnbs full time. She doesn’t have excess cash to buy a property outright but has spotless credit.
Taylor first structures her new venture as an LLC to protect her personal assets. She applies for an SBA 7(a) loan to purchase a 2 bedroom condo in a trendy beach town for $300,000.
With a 740 credit score and detailed business plan projecting $60,000 in gross annual Airbnb rental income, she is approved for a 10-year SBA 7(a) loan at 7% interest with just 10% down.
Taylor furnishes the condo for $15,000 on a 3-year equipment loan. After closing costs, her total financing needed is $342,000. With the influx of capital from the business loan, Taylor is now the proud owner of her first vacation rental property!
scenario: Renovating and Expanding an Existing Airbnb Business
Once established, Airbnb hosts can leverage business loans to upgrade and expand their short term rental empire. Here’s one example:
Nick has run 2 successful Airbnb properties for 3 years, bringing in $125,000 in annual revenue. He wants to scale his business by renovating his current properties and purchasing 2 additional local condos to rent out.
With 3 years of tax returns showing consistent profits, Nick secures a $400,000 SBA 504 loan at 5% interest to cover the renovations and down payments. He uses an equipment loan to finance new smart home devices and high-end furnishings.
Nick also gets approved for a medium-term loan to cover minor renovations to get the new properties ready for tenants. In just a few months, Nick has grown his Airbnb business from 2 to 4 highly profitable vacation rentals!
The Bottom Line
Funding your Airbnb venture through a small business loan allows you to retain full ownership rather than bringing on an equity investor. As the sole owner, you will reap all of the potential profits as your vacation rental business grows.
Just be sure to provide conservative income and expense projections, account for all costs and risks, and only take on a loan amount your cash flows can support. With proper planning and preparation, business loans can provide the capital fuel to turn your Airbnb dreams into reality!
Fuel your investment strategy with our dedicated Airbnb Financing program. With loan limits up to $3 million and a painless, streamlined process, we make investing in short-term rentals easy.
The Airbnb market presents a lucrative opportunity for investors. The number of short-term rentals has increased by 105% in the last three years, and in some cities, investors are making almost $7,000 per month on just one property.
The only catch? Qualifying for a traditional mortgage on these ventures can be difficult. Without a lease in place or proof of the property’s annualized income, most lenders won’t finance a rental — leaving investors like you scrambling for funds.
Luckily, we’re not like other lenders. We know how to assess the viability of a short-term rental property, and we offer dedicated financing for just such investments. We make commercial lending easy, letting you find the true potential of Airbnb and short-term rentals.
OUR SHORT-TERM RENTAL LOANS
At Kram Capital, we offer short-term rental financing to investors across the country. Ideal for purchasing single-family homes, condos, duplexes, and other properties intended for Airbnb or VRBO use, our loans are flexible, affordable, and simple to apply and qualify for.
Benefits:
| No W-2s or tax returns required | Loans up to $3 million |
| New investors welcome | Flexible loan terms |
| Fast closings | Low, fixed interest rates |
How To Finance Your First AirBNB Property
FAQ
Can you start an Airbnb with a business loan?
Does owning an Airbnb count as a business?
Can I use a DSCR loan for Airbnb?
How much money do you need to start an Airbnb business?
What is an airbnb business loan?
An Airbnb business loan can go towards purchasing a vacation rental property, renovating an existing property, or paying for ongoing property-related expenses. While loans specifically for Airbnb’s do not exist, there are plenty of other small business loans that can be used to meet your needs.
Can you buy an Airbnb with a small business loan?
Small business loans used to be reserved for local restaurants and town shops, but now Airbnb owners can use this option. Airbnb has paired with some of the major names in the loan business, like Fannie Mae and Better Mortgage, to make this option a little easier for those looking to buy an Airbnb.
Can Airbnb host use a business loan?
An Airbnb host can use a business loan to buy a short-term rental or to renovate it or furnish it. It can even be used for Airbnb arbitrage. A particularly good Airbnb loan type is the Small Business Administration (SBA) 504 loan, also referred to as a commercial real estate loan. Best for: Airbnb arbitrage.
Can you finance an Airbnb rental?
A home equity loan, sometimes called a second mortgage, is another potential option if you’re looking for ways to finance an Airbnb rental. Home equity loans and home equity lines of credit (HELOCs) can provide you with money in the form of a lump sum (or line of credit) based on the amount of equity in your primary home.