Can website businesses be purchased with SBA financing?
Purchasing a website business with SBA financing is extremely rare unless the website has physical assets, real estate and or inventory. In my experience as an online business broker, one of the first questions that many buyers ask is if the business will qualify for SBA financing. Unfortunately, it is next to impossible to purchase an internet business with SBA financing based solely on the financial performance of the internet business. While our online business brokers have advised on internet business transactions that were completed with SBA financing, these deals are very rare because most internet businesses don't have physical assets to collateralize the loan with. Regardless of how much net profit a website business produces, the website broker advising on the deal can only do so much with helping a buyer obtain SBA financing even when there are physical assets included with the sale. Unfortunately, most SBA loan offers are stuck in the past with regard to only approving SBA loans for businesses that have physical assets and brick and mortar locations. Even if the website business has a multiyear track record of profitability, the SBA bankers are only focused on what type of assets they can seize in the event of a default on the loan payments. In the absence of any tangible website business assets to collateralize the loan with, those few buyers that can get SBA financing for a website business purchased are forced to tie their personal assets such as their homes, cars, property etc. to the deal. In my experience as an online business broker, I don't see the SBA loan underwriting process changing anytime in the near future, which means SBA loans can usually only be obtained if the website business includes tangible assets of significant value such as inventory or real estate property. As a website broker that exclusively advises on internet business transactions, I would love to see the SBA underwriting policy updated to take website cash flows into consideration when reviewing SBA loan applications because it would be easier for buyers to obtain financing which would ultimately result in website brokers closing on more deals.
However, I have seen SBA financing on online business broker deals, but in every case, there was over $100,000 in tangible assets such as inventory or property that were tied to the deal. Bank financing has actually become harder to obtain since the height of the financial crisis in compared to the current lending environment. Given the shift in the traditional SBA bank financing environment, our online business brokers always recommend that sellers at least be open to the idea of financing a small portion of the total purchase price as selling financing.