Financing Your Dream Glamping Site

BY PAUL BOSLEY

One of the greatest advantages glamping sites has over traditional brick and mortar accommodation are the low start-up costs and high return on investment. This does not mean however, that they are cheap. Purchasing the accommodation for your site is just one consideration, and it is important to remember everything else that is required to run a successful glamping site. This can include the land that your site will be located on, the infrastructure required such as water and electricity, signage, point of sale systems, furniture, vehicles, and tools. The point is that to acquire all these things to an acceptable level can become an expensive endeavor.

Thankfully, there are options available to help prospective glamping site owners achieve their goal of creating their dream glamping site. Paul

Bosley, Founder of Business Finance Depot, is here to talk us through a couple of these options, using case studies based on real life experiences.

Frank and Vikki want to improve their existing RV park by adding an internet system and glamping structures to attract families who want the outdoor experience but do not own an RV. They have a mortgage with a local bank with a low, fixed rate mortgage so they decided to approach their local bank for financing. The local bank hesitated to offer additional financing and the cost to refinance their loan with another lender was prohibitive.

They attended the Glamping USA Show in Aurora, CO, saw the glamping structures they wanted to purchase, costing $30,000 each installed. They visited the Business Finance Depot booth and learned that the $150,000 for 5 glamping structures could be financed using an equipment finance agreement (EFA). They learned that EFA’s use the glamping structures & IT equipment as the only collateral required so they decided to apply because they have excellent personal credit, and their RV park is profitable. The approval required 20% down and financed the equipment over 3 years. They were unhappy that the interest rate was 10%, but when they considered that it was a fixed rate and their expected rental income from the glamping structures will exceed the monthly payments, they decided to move forward because they were using other people’s money to improve their RV park and their monthly cashflow.

Frank and Vikki were able to achieve their goal of adding an internet system and glamping structures to their RV park using an equipment finance agreement. There are many benefits to an equipment financing agreement over other forms of loans but perhaps the most important is that they can be completed much faster than SBA and USDA loans.

“No matter what type of loan you are going for, there will always be a down payment. No one is going to finance you 100% of your project cost, you will always have to have skin in the game,” says Paul. This is important to remember when thinking about upgrading or setting up a glamping site.

So, why 20%? “The down payment or equity injection will be calculated depending upon the useful life of the collateral.” The collateral in this case was the IT equipment and the glamping structures which, while cheaper than traditional brick and mortar options, do not last as long.

Fixed interest rates vary from borrower to borrower based on several factors. In this case, the 10% interest rate was achieved because Frank and Vikki had excellent personal credit, and their RV park was profitable. “Fixed rates vary by the borrower’s financial strength, time in business and industry experience,” explains Paul, “Experience is integral when it comes to successfully applying for a loan. You need to have a background or proven understanding of the industry that you will be entering in to.”

Gary and Leslie want to purchase some property, install infrastructure to open an RV park with glamping structures. The property they are considering is selling for $250,000. They estimate $500,000 for construction costs for the 10 RV sites and a small office & retail store to greet campers. They have received a $150,000 quote for 5 glamping structures, and they estimate needing $100,000 working capital for marketing, payroll, inventory and construction overruns so the project total is $1,000,000.

They have decided their best financing method is to approach a local bank for a commercial loan. The local lender has not got experience with financing an RV park, so they were hesitant to offer financing. Gary and Leslie attended the Glamping USA Show and met the representative from Business finance Depot who explained that SBA loans can be used for financing their project, so they decided to apply. The SBA lender that Business Finance Depot used offered Gary and Leslie 80% loan requiring a $200,000 equity injection. The repayment term is 25 years, and the interest rate is a variable rate starting at 6.25%. There are roughly 3% of closing costs which gets added onto the loan. The lender informs Gary and Leslie that since they are financing the construction, they will need to approve the general contractor before construction begins. The lender also needs the invoices for the glamping structures, the point-of-sale system, the displays and refrigeration units for the camp store. Once the construction is completed the lender will give Gary and Leslie the working capital and the loan closes. Gary and Leslie begin making interest only payments for the next 3 months and begin full payments starting the 4th month after opening their RV park.

Gary and Leslie were able to set up their new RV Park using an SBA loan. The Small Business Association (SBA) offers a national loan program that can be used to finance any franchise approved by the SBA, a list of which can be found on the SBA franchise registry. An advantage to SBA loans is that the SBA offers a substantial loan guarantee meaning that there is less risk to the lender and therefore the loan is more likely to be approved. On top of this, SBA loans offer some of the lowest interest rates available and can be repaid over the longest term currently available.

“The equity injection for an SBA loan ranges from 10% to 30% of the overall project cost. Ultimately, this is down to the lender and the financial strength of the borrower. Depending on the workload of the bank you are going to, along with the efficiency and responsiveness from both the lender and the borrower, the process can usually take around 90-120 days,” says Paul. Once again, industry experience, transferable skills and related education is integral.

So, no matter what type of loan you go for, there are several things that you must have. Firstly, enough money to make a down payment and secondly, relevant experience. “Proven knowledge of the industry you are entering is everything. Any previous experience in the industry should be noted along with part-time/volunteer work, courses taken in your own time or visiting industry events,” says Paul.

To find out more about Business Finance Depot, find their website at businessfinancedepot.com, and make sure to check out the Business Finance Depot YouTube page for informative video series on financing your new business venture.

Founder of Business Finance Depot, Paul Bosley is known for his expertise in financing for franchises and especially in the health club industry. Paul is the owner of Healthclubexperts.com and has partnered with several national franchises to assist new franchise partners acquire the capital they need to launch their new businesses. He is also keen on helping existing business owners find the finances to expand their current business. He is a regular speaker and writer for many industry conferences and online magazines. Paul has been a regular volunteer counselor for SCORE, a division of the SBA, and it is during this work that he learned the value of SBA loans for funding new and existing businesses.