Purchasing a B&B with Cashflow Using SBA Financing

Purchasing a B&B with Cashflow Using SBA Financing

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Hi Beau, I want to purchase an existing Bed & Breakfast in Norfolk, Virginia. I have the tax returns and the current owner is writing off nearly everything and they’re running a lot of personal expenses through the tax returns.

My question to you is: I am buying it for the value of the real estate alone. There is probably no business value.

If the cashflow isn’t there, is an SBA loan still a viable option?

Thank you,
Michelle

Michelle wants to buy an existing bed and breakfast in Norfolk, Virginia. She intends to focus on real estate rather than the business value. However, the current owner has been deducting personal expenses and running them through the business tax returns, potentially affecting the cash flow. Michelle asks if she can still obtain an SBA loan under these circumstances.

Beau confirms that an SBA 7a loan is available for this transaction because it involves commercial real estate. To proceed, they would require the business's tax returns from the past three years, including year-to-date information. They would review the returns for any adjustments and potential add-backs of personal expenses. Beau explains that the loan's viability depends on Michelle's global cash flow, credit score, and revolving expenses. Assuming she meets the necessary criteria, an SBA loan is a viable option. They would create three years of projections and utilize a business plan template to analyze the expenses.

Beau acknowledges that many small bed and breakfast businesses lack cash flow due to personal expenses being incorporated into the business. However, in cases where the purchase primarily focuses on real estate value, SBA-preferred lenders can facilitate the loan process. Beau offers to discuss SBA financing options and other types of financing through a call, providing support for startup businesses, franchise acquisitions, new office building construction, and business expansion.

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Timestamps:
(00:34) - SBA loan availability based on commercial real estate being involved in the transaction
(00:45) - Need for tax returns from the previous three years and looking for any add-backs that can be documented to do a projection-based loan.
(01:09) - Assumptions of good credit score, not having substantial revolving expenses and one-to-one global cash flow viability for SBA 7A loan.
(01:37) - Bed and breakfasts have no cash flow due to personal expenses being run through the business, but in this case, of buying for the value of the commercial real estate.
(01:44) - Some personal expenses can be added back in, and SBA-preferred lenders can make this a viable option.

💥 Thanks for watching 💥
#bedandbreakfast #SBA #sbafinancing #cashflow

About Beau: Beau Eckstein is a real estate entrepreneur, TV personality, and commercial mortgage advisor specializing in construction financing and multi-family lending.

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