Business loans to buy an RV park

How can I finance the purchase of an RV park?

You can finance the purchase of an RV park with a commercial loan that’s secured by the property. However, as these properties are generally seen as specialized security, some lenders may classify them as high-risk investments. That might mean paying a higher down payment of the property’s value in order to get a smaller sized loan.

If you’re buying a lower cost RV park and want to pay for it completely upfront, but you still need cash to do renovations or purchase supplies, you may be able to get an unsecured business loan. Lenders often require that you provide evidence of your financial situation, details of your relevant management experience and a business plan that shows revenue and cash flow forecasts.

If you have existing RV parks in your business portfolio, your chances of approval will likely be higher. Your accountant can help you draw up comprehensive business statements that could potentially improve your chance of approval and get you a lower interest rate.

How much does it cost to buy an RV park?

What you’ll pay for an RV park or campground varies and can depend on if you buy both the land and the business, buy the business and lease the land or buy the land and start the business from the ground up. Generally speaking, small RV parks in less popular areas could cost as little as $300,000 while the most successful RV parks can cost over $1 million to purchase. Keep in mind the price will vary greatly depend on the location and whether you’re starting the business from scratch or not.

Other considerations may include:

This is far from an exhaustive list. Accurately valuing a business is complicated. Beyond the purchase price of the property and business, determine if you need money for immediate improvements and repairs. With this in mind, consult with your accountant, real estate agent or business adviser to determine a fair price for the RV park or land.

What business factors should I consider when buying an RV park?

An RV park is a big investment, so consider these factors before making your purchase:

• Your experience. Previous experience managing a campground, hotel or other vacation spot similar in size to what you’re looking to purchase will impact the success of your loan application. Experience can also have an impact on the profitability of your business.
• Your qualifications. A degree in hotel or hospitality management, an education in business and years of experience all add up. These qualifications will set you on the right path to owning and managing a successful campground or RV park, and it may strengthen your loan application.
• Licenses and permits. Depending on what kind of park you’re purchasing, you might need licenses and permits from both the municipal and provincial levels. Not all land can be used for any purpose, so you’ll want to make sure you can run an RV park without breaking any zoning rules.
• Occupancy levels. If you’re buying an operating park, consider how full or empty it is during the busy season. Benchmark occupancy levels change frequently and vary by location and season, but as a general rule, an occupancy rate of less than 50% represents an underperforming business.
• The amount of annual stays. Return customers are key to almost any business. People who want to become annual site holders can make a difference in the financial stability of an RV park or campground. Look for a park with a decent amount of annual site holders.

How can I make sure the business is worth buying?

If you’re buying an RV park that’s up and running, it could make it that much easier when transitioning owners. But before you decide if it’s a worthwhile purchase, dig into its finances. Consider these factors when evaluating a business’s worth:

• Business finances. What is the park’s recurring net operating revenue, and how has it performed over the past five years? Are there opportunities for growth or improvement? If buying as an investment, you’ll also need to consider the financial stability of its tenants.
• Reason for sale. Are the current owners looking to make a profit, or is there a more serious underlying reason why they want to offload the park?
• Occupancy levels. Lenders will generally want to see a campground or RV park with high occupancy levels before approving a business loan application. Checking year-round occupancy levels, including the ratio of annual site holders, gives you an idea of where the strengths of the business lie and where there is room for improvement.
• Location. Look at both the park’s proximity to local attractions and the competition from other accommodation providers. Does your park stand out from the competition? If not, how expensive would it be to improve it so that it does?
• Facilities. Does the park have the necessary facilities for the type of guests you’re trying to attract? For example, if young families are your primary market, does your park have a playground, swimming pool or club house? Are you located near other recreational options in the surrounding area?
• Building and pest report. No one wants to stay in a park where there are problems with ants or mice, and being in nature can make it difficult to control. The price for pest control can be high, so make sure you ask about issues or if renovations are needed. You may be able to negotiate a lower price or avoid making a bad investment altogether.
• Lease terms. If you’re buying the business but not the property, look for a long lease term that allows you enough time to grow the business and pay off your loan. Have your lawyer take you through the lease agreement to make sure you’re fully aware of your responsibilities in terms of maintenance and upkeep, as well as your rights to construct new buildings and renovate the property as needed.
• Local restrictions. If you’re planning on renovating or upgrading the park, check with the local governing agencies to find out if there are any restrictions on what you can or can’t do on the land.

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Bottom line

Buying a campground or RV park can be a solid way to earn a steady income and own a business. But before you invest in land or an existing RV park, you’ll want to make sure it’s the right property for your needs. Once you’ve built up your savings for a down payment and found a business you want to buy or the land you want to use, you can find a business loan to finance your purchase. If you only need a small amount of money to pay for renovations or equipment, you might like to consider a line of credit.

Interested in purchasing a different type of business? Check out our guide on how to finance an existing business.

Frequently asked questions

• How can I finance improvements to my property?

  When you own an RV park, you’ll have to maintain the parking spots, restrooms, common areas and main office. If these aren’t in the best shape or need to be renovated, a business line of credit may be useful. Instead of paying interest on a lump sum like you would with a traditional business loan, you can access only the amount of money that you actually need with your line of credit. Any untouched credit won’t accrue interest, which can keep the costs of borrowing money as low as possible.

• Can I look into Canada Small Business Financing Program loans to finance my RV park?

  Yes, you can learn more about the CSBFP here. You can apply for these loans through a chartered bank, credit union or a caisse populaire. They are at least 75% backed by the Government of Canada. Your business must make under $10 million in revenue annually to be eligible for this program. While this program can be particularly handy for small businesses or startups to access up to $1,000,000 in funding, there are restrictions on what you can use the money for. Luckily, you can use the funds to purchase land, renovate buildings or purchase equipment – which could come in handy when buying an RV park.

  Your bank or financial provider will ultimately determine your approval for this loan – and approval is never guaranteed.

• How long does it take to get an RV park professionally valued?

  The valuation process will usually take between two to three weeks.