Financing structures for non-SBA eligible cash flow businesses?

by a searcher

3 years ago

Interested in understanding financing structures for cashflow SaaS businesses that are not SBA eligible (partner/partial buyout).  Traditional financing terms I have heard would be a cap of 3X EBITDA at 6-14%, which seems very expensive. I am reviewing a B2B SaaS business with EBITDA of $1.5MM, 20% margin, proposed price 4x to 8x, 95% customer retention, recurring revenue model, and growing market. Interested in financing the transaction through combination of debt and equity. 

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lender from University of Central Florida

We've done multiple SAAS acquisitions, and we don't cap at 3x EBITDA, so that's interesting. Even with higher multiples, there are still viable structures you can use with SBA, granted, still expensive like you said. Happy to discuss more, just shoot a DM.

2 months ago | like reply | 0 likes

searcher from University of Pennsylvania - The Wharton School

You could look into revenue-based financing (RBF) models- likely focused on capital used for growth/operations of a currently owned business, rather than capital for acquisitions- but may worth looking into. This comes to mind since years ago, I was advising SaaS startups with healthy revenues and a path to growth and I pointed them towards RBF, which offered them a way to use SaaS revenue streams to grow, without parting with equity in the earlier stages of their growth trajectory.

I did a deep dive and saw Lighter Capital as an early leader- since then, many new companies/models, including Pipe, have entered the scene. This may not meet their requirements to apply capital to an acquisition, but could be a good tool to keep in mind for the operating phase.

4 months ago | like reply | 0 likes

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