You are a 1099 contractor with Airbnb. This means you need to pay taxes on this income at the end of the year. This is why the bank said after a year they may be able to include it - once you have a documented year of taxable income. However, non-salaried money, from a bank perspective, is always more risky. People who make tips for a living are often not able to claim that money unless they pay taxes on it and claim it on their returns.
They are telling you to set up a Business Account because that's what banks do. It's clean and neat and tidy when it comes to keeping your personal income separate from your business (Airbnb) income. Frankly, if you are trying to use that money as a means to get financing for a home remodel, I would encourage you to do that too and run all the expenses for Airbnb through that account - especially if you need to record the income. At a minimum, make sure you are using accounting software at home to keep these expenses identified separately from your household expenses.
Brush up on your tax law - go back to the bank and talk to them. They should be able to help you understand more clearly what you need to do to get the backing to use the grant monies you've been approved from the state (Mass Save is a Massachusetts only program so most of us here don't have such a thing).
Good luck
