Rick Newman agrees that when it comes to inn financing, lenders are more risk sensitive and stringent on their requirements when entertaining loans in the hospitality sector. Bed and breakfast/inn properties must document sufficient cash flow to pay all expenses and comfortably service the debt. A lack of direct industry experience in the professional backgrounds of perspective buyers can be an issue, especially if the property has been underperforming. "Lenders generally like to see the owners carrying back 10% in seller financing when the income has suffered. This should not be as altogether unattractive to the sellers, as the gain from that portion of the sale is deferred until realized at some point in the future," said Newman.

Newman also noted that a recent change in SBA regulation makes it possible to refinance using the SBA 504 Loan program. In contrast to the common variable rate SBA 7A Loan, the 504 "generally" offers a period of say 5 years, where their interest rate is fixed. This program may be very useful for B&Bs who have variable rate loans, mortgages that will adjust within the next 24 months, or who simply desire to restructure their debt obligations.

David Caples of Lodging Resources says that banks are overloaded with lodging asset of all sized and are particularly shy of smaller ones. He recently shopped a property valued at $1.2 million coasting in a very popular east coast market to nine banks. Only one bank took interest, but the final terms were so onerous to both owner and seller that it didn't proceed. The biggest issues: paying the loan service.

Caples said that today, we are now seeing a 1.3 debt service ratio, for example: " to service $100,000 in annual debt payment an inn must show $130,000 on the bottom line based on verifiable previous income, no projections only rearview mirror," said Caples. "On the brighter side, we just closed a deal last Friday that took a long time," said Caples. "It was a classic tale of how you need a representative who is a committed realtor with experience with inns to see things through." True, a good realtor always comes in handy.

Victor Castro of Bed and Breakfast Collection Realty said "one of the most exciting things about being part of United Country Realty is the access they provide realtors to very powerful and unique selling propositions, such as special departments for 1031 exchanges, foreign purchasers through D3 visas, conservation easement specialists, auction specialists and their international marketing partner, Colliers International. Combined with the B&B marketing expertise of Pamela and Marie Lanier, we're casting a very wide net to attract both commercial and residential buyers for our innkeeper owners."

(Editor's note: Pamela always thinks everyone should be very, very cautious when investing their retirement funds).

Bill Oates:bill@innpartners.com.
Rick Wolf from the B&B Team: rick@BBTeam.com.
Rick Newman from Inn Financing: Rick@innfinanicing.com.
David Caples from Lodging Resources Inc: Djcaples@lodgingrespoucres.com.
Victor Castro from the Bed and Breakfast Collection Realty: innsforsale@bedandbreakfastcollection.com.
Claude Gagne of The B&B and Country Inn MarketPlace: claudeg@charter.net.
Barbara Furyna of Diane Turton Realtors: NJbestmove@aol.com.

Best Wishes,

Pamela