Acquisition debt options for breakeven software businesses

searcher profile

February 04, 2025

by a searcher from University of Virginia-Darden - Darden School of Business in Virginia Beach, VA, USA

I am evaluating a software business that is around breakeven and looking for debt options to purchase it. In the past I've used PE-sponsor lenders who will loan out at 1-1.5x revenue for these types of transactions, but not sure if this exists for self-funded searchers. I would also need to avoid a personal guarantee on my house (by whatever means possible), but fine to guarantee anything else.

I've looked at SBA loans, but can't meet the debt service coverage ratio required given the nature of the business.

Other options I'm considering are private credit (or some combination of debt and equity), convertible loan, etc. Any advice would be appreciated.

3
18
111
Replies
18
commentor profile
Reply by an investor
from Stanford University in New York, NY, USA
Mark im UVA 2001 and have some ideas. Mostly via Axial. It’s free to use axial in this way.

one idea is decathlon who we know well.

peter at axial dot net if you want to discuss more
commentor profile
Reply by an intermediary
from University of Pennsylvania in Durham, NC, USA
Most revenue-based lenders have a bias against acquisition financing since they want the borrower to use the loan to fund growth. That issue aside, the best fit lender will depend on the size of the company you're acquiring and how much you want to borrow, Decathlon (https://decathloncapital.com/) (mentioned previously) could be a fit. Other lenders to consider include Revtek (https://revtekcapital.com/), Element Saas Finance (https://www.elementsaasfinance.com/), River SaaS Capital (https://www.riversaascapital.com/our-funds/venture-debt-fund/), and Recurring Capital Partners (https://recurring.capital/). A Google search will yield many others.
commentor profile
+16 more replies.
Join the discussion