Options for Financing the Purchase of a Website
Financing a website purchase, or getting cash for a down payment can take many forms. Hopefully the options listed below will give you some ideas where you can find the money to buy a website!
Credit Cards - many buyers these days are tapping their credit cards for their down payment to buy a website. The downside of this option is that if you are getting an SBA loan to buy a website, they won’t let you use “a credit card/loan – borrowed money” for the down payment. Other than that this option works for many since there is no waiting for the money or cumbersome approval process.
SBA Loans – Many websites today are purchased with 7(a) SBA loans. There are conditions however in getting one to buy a website. You still have to put down between 15%-30% depending on the lender, you must have good or excellent credit, and the website has to have sufficient cash flow to support the debt service of the loan. The loans are typically 10 years in duration and 2-3 points above the prime interest rate. The process of getting an SBA loan to buy a website can be a tedious one and can take one month to six months to complete/fund.
Home Equity – With home equity growing rapidly, many buyers utilize these funds to either buy a website or utilize it for a down payment. Lenders are eager to give out home equity loans. Loans can usually be secured rather rapidly, but plan ahead and move quickly so you don’t miss out on any great websites that come out on the market for sale.
Owner Financing – This form of financing is only applicable we=hen you have a willing website owner. Usually the buyer will put down 40 to 60% (utilizing one of the methods above), and the owner will carry back a note for a duration of usually two to five years. Interest rates vary but they usually will be higher than banks or commercial resources. Sometime there will be “combo” financing with the owner taking back a partial note and the rest of the financing will come from the above resources.
Retirement Plans – Many buyers have built up sizeable amounts in their work 401(k) plans. There is a way to tap this money tax free – put it into a “special trust” that then buys the website for you. Many people fleeing from corporate are going this route.
Note Buy Out Firms – There are companies and individuals who buy notes sellers have taken back. Get your possible deal in front of these individuals to see if they would be interested in buying out the note after you have completed the deal – this may sway some sellers who want all cash for their deal and don’t know about this creative financing option!
They key to all this is to be creative. You may want to utilize several of these sources to get your deal done. With all these resources along with cash in the bank and perhaps relatives who may want to invest in your new website – you should have no problems with the financing end of buying a website!