Financing the Purchase of an Existing Website

Financing the Purchase of an Existing Website

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Financing the Purchase of an Existing Website

Reprinted with permission of VotanWeb.com

If you're thinking about buying a website, you'll be pleased to learn that financing the purchase is generally quite easy. In fact, it's far simpler to get the money you need to buy an existing website than it is for a start up. Most people simply don't realize how to do it. Don't get the wrong idea: you're not going to buy a business, at least a good one, with no money down; that only happens in the infomercials on TV.

Many prospective website buyers mistakenly believe that traditional lenders will welcome them with open arms when they present them with a website they're looking to acquire. Unfortunately, nothing can be farther from the truth. It still amazes me how the banks have got most people fooled. They run these great ad campaigns promoting themselves as business friendly but try to get them to lend you money to buy a website. It won't happen.

It doesn't matter how experienced you are, or what your relationship is with them. Unless you're prepared to collateralize the loan 100% with personal liquid assets, they aren't going to give you a penny. So don't waste your time seeing them. With the terms they offer, it's just not worth it.

The Small Business Administration does NOT lend money for people to buy businesses. The SBA guarantees loans made by lenders (up to a certain amount) for small business acquisitions. There are both good and bad points to an SBA loan.

The good news is that there is money available; up to $1,300,000
The terms for repayment are favorable-up
When a business passes the SBA qualifications, you can be fairly confident that it is a solid business
If you do not have at least 25% equity in your home, you may not have to fully collateralize the loan.
Typically, they will finance 70-80% of the deal.

You may be thinking, if you can make the acquisition with 20% down, why would you even think about anything else? Here's why:

Many small websites won't pass the SBA requirements
The financial review is based upon the weakest of the past two or three year's tax returns
You must have demonstrative experience in a business that is similar to the one you are considering

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They will want your house, life insurance policy and your first-born as collateral.
It can take up to 90 days to complete the entire process.

Having said this, it is nevertheless advisable for you to explore the SBA option. You'll want to approach a preferred SBA lender. Most banks have this status. What it allows for is the banks to approve the loan on their own without having to submit everything to the SBA. If you choose this route be VERY specific in asking the lender for timelines to complete the transaction.
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