How to finance SaaS with SBA

searcher profile

May 02, 2024

by a searcher from Columbia University - Columbia Business School in Washington, DC, USA

Hi all,

I'm working on a sub-scale SaaS deal with 60% CAGR over recent years.

Seller and I have agreed on a price of 3x ARR. TTM SDE is ~$900k.

Given the growth, DSCR from prior year(s) looks terrible.

Thoughts on how to finance (preferably with SBA)?

Best,
David

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commentor profile
Reply by a lender
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA
^redacted‌ thanks for the tag. David and I already spoke. But to share what we discussed, my commentary was that most SBA lenders are going to want to see two years of cash flow to support debt service. It is hard to do SBA financing with quickly growing companies, whether SaaS or any other type of business. The SBA program just is not designed for companies growing quickly with the underwriting requirements the SBA and Banks have.
commentor profile
Reply by a searcher
from University of Edinburgh in Singapore
Came across a few instances where this has been done (e.g. https://acquiringminds.co/articles/andrew-swiler-lanteria), but generally agree that it'll be challenging to procure an SBA loan for SaaS companies with that profile (high growth, low or negative profitability, limited track record, etc.). I would suggest looking into venture debt and revenue-based financing options.
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