Do you need a commercial mortgage for a B&B?

Whether you’re planning to open a B&B by the beach, or are currently managing a cute country cottage, the day may come when you start to wonder about commercial mortgages.

Well, with UK room occupancy reaching an impressive 77% in April 2024, we thought we’d take the time to answer a few mortgage questions current and budding B&B owners may have on their minds.

Do you need a commercial mortgage for a B&B?

Whether or not you need a commercial mortgage for your B&B depends a lot on your unique circumstances.

For starters, you only need a mortgage if you need the funds to complete a sale. If you currently already have the money required to complete your purchase, you won’t need to get a mortgage.

Having said that, if you’re looking for property financing and the property is going to be used exclusively as a bed and breakfast, then yes, a commercial mortgage may be a useful tool to help you gain the financing required.

However, a commercial mortgage isn’t your only option.

If less than 40% of the property is used as a B&B (for example, if you use 60% of the property as your own personal home) you may be able to apply for a semi-commercial mortgage instead.

If you already own the B&B and are looking to gain funding to power your renovation project, you could potentially look into property development finance or a bridging loan, both of which are short term loans that generally need to be repaid within a maximum of two years.

How big will my deposit need to be?

That depends a lot on the price of the bed and breakfast. As a general rule of thumb, most lenders prefer borrowers to be able to put up 25% of the cost of the property as a deposit, which means for an £800,000 property, you’d need to put forward £200,000. There will also usually be admin fees, legal fees, and possibly broker fees.

How do I apply for a commercial mortgage?

We might be able to help with that part. At Funding Options by Tide, we act as a broker, connecting our users with suitable lenders. Just click the link here and fill in your information to begin looking for a suitable mortgage. Don’t worry, we can let you know if you’re eligible and provide you with a quote without impacting your credit score, although if you decide to go ahead with one of the lenders, your score would be impacted once you apply.

If you find a suitable lender you like and decide to apply, then you’ll likely need to submit a business plan that includes cash flow projections. If you settle on a short-term loan, like a bridging loan, you’ll also need to submit an exit plan.

Apply for a commercial mortgagee

We try to make applying for funding easy. Just click the link below and submit your details to find out if you’re eligible for a mortgage of up to £20M from one of the lenders in our network of over 120 providers.

Compare and apply for commercial mortgages

Please note that the information above is not intended to be financial advice. You should seek independent financial advice before making any decisions about your financial future.

It’s important to remember that all loans and credit agreements come with risks. These risks include non-payment and late-payment of the agreed repayment plan, which could affect your business credit score and impact your ability to find future funding. Always read the terms and conditions of every loan or credit agreement before you proceed. Contact us for support if you ever face difficulties making your repayments.

Funding Options, now part of Tide, helps UK firms access business finance, working directly with businesses and their trusted advisors. Funding Options are a credit broker and do not provide loans directly. All finance and quotes are subject to status and income. Applicants must be aged 18 and over and terms and conditions apply. Guarantees and Indemnities may be required. Funding Options can introduce applicants to a number of providers based on the applicants' circumstances and creditworthiness. Funding Options will receive a commission or finder’s fee for effecting such finance introductions.