Choosing the Right SBA Loan for Your Glamping Business
At the very beginning of my journey, I had absolutely no clue where to start when it came to acquiring funding for my glamping business idea. I literally typed into Google “how to get a small business loan”, which for us beginners, is not a bad place to start.
What are the advantages of a SBA loan?
It took quite a bit of research until I came to the conclusion that a SBA loan would make the most sense for me, rather than applying for a traditional bank loan. Why do I think that?
SBA loans require a lower down payment
It is easier to qualify for a SBA loan
A SBA loan can cover construction and long-term financing in one transaction, whereas this would typically be done across multiple loans/transactions going the traditional route
To be clear, SBA and traditional bank loans are not the only options when it comes to acquiring funding. You can also access capital through other avenues such as family/friend investors, angel investors, or grants. However, it’s very important to me to maintain complete ownership over my business, so going the investor route, which often requires sharing a percentage of revenue, does not seem ideal … nor do I have any family/friends that are wealthy enough to fund my full project. And as an average German-Irish American, I do not qualify for many grants, which I understand completely.
Which SBA or federal loan is right for your glamping business?
The short answer: For the majority of glamping business ventures, the best fit for federal funding will be the SBA 7(a) loan.
The long answer: Each loan program is targeted for different business venture types, with different qualifications requirements and payment structure. I’ve outline the details for the three most common federal loan programs below.
SBA 7(a)
Max loan amount: $5M
Can be used for:
Business start-up, acquisition, or expansion
Partner buyout
Debt consolidation
How it works: Funded by bank, partially guaranteed by SBA. Uses market interest rate set by the Federal Reserve.
Timeline: Loan application process takes 2-3+ months, though start-ups typically take longer.
SBA 504
Max loan amount: $12.5M
Can only be used for:
Financing fixed assets like real estate and equipment
Not available for interim construction, working capital, or business goodwill
How it works: Bank provides a first lien for 50% of the project cost at market interest rate. SBA Certified development company provides 30-40% financing using a government backed unsecured bond with a below market, long term, fixed interest rate.
Timeline: Loan application process usually takes longer than a 7(a) loan.
USDA Business & Industry
Prerequisite: Business must meet USDA definition of a ‘rural location’
Max loan amount: $25M
Can be used for:
Business start-up, acquisition, or expansion
Partner buyout
Debt consolidation
Upgrade infrastructure or amenities
How it works: Funded by bank, partially guaranteed by USDA. Interest rates are negotiated between the lender and borrower. 20% minimum down payment.
Timeline: Extra site assessments needed, so loan application process usually takes awhile.
Things to keep in mind …
Of course, there is so much more to say when it comes to SBA loans, but in an effort to keep this concise, here are a few things to keep in mind on the subject:
The SBA isn’t the lender. You apply for the loan through a ‘Preferred SBA Lender’ bank or credit union and then that lender applies to the SBA for a loan guarantee. With that guarantee in place, the government will pay the lender if you default on the loan.
For SBA 7(a) loans, personal guarantees are required for anyone who owns ≥20% of the business.
Candidates that plan to be owner-operators that live on the land tend to have an advantage in the application process.1
When applying for the loan, the living accommodations for the on-site manager can be included in the start-up costs so long as they are priced within reason.1
Where to begin?
As with all loans, working with a lender that understands your business and can see your vision is important. Not all banks or loan officers are familiar with the glamping industry, so it’s important to find one that is.
As for me, I learned quite a bit about SBA loans from a presentation by Bruce Hurta representing Ameris Bank at the Glamping Show USA. Bruce specializes in assisting campgrounds and glamping ventures as they work to secure federal loans. As for me, my next step is to reach out to Bruce and get the conversation started. I’ll be sure to keep you posted on this front.
If anyone out there has any tips, critiques, or questions, I’m all ears! Send them my way in the comments section below!
Hurta, Bruce. SBA & USDA Federal Loan Programs for Outdoor Hospitality Properties. Ameris Bank. Glamping Show USA. Aurora, Colorado. 4 October 2022.
