SBA lending alternatives/ supplements for a SaaS company

searcher profile

February 03, 2024

by a searcher from University of California, Berkeley in San Francisco, CA, USA

Hi all; I'm in the process of putting together an LOI for a SaaS company, and wanted to share my potential financing challenge and see if anyone has any recommendations.

The target company had been earning ~$320K EBITDA annually through Q3 last year, but then implemented a packaging/ pricing change with the net result of increasing EBITDA to $90K/ month, or $1.08M annualized. The company is looking to get valued on that earnings basis, at $3.5M (aka a 3.5x EBITDA multiple), which I think is completely reasonable based on my analysis of their renewal/ churn rates since this change. However, of course SBA lenders may have an issue with this, given that it's only the last few months that reflect this updated earnings level.

In the case that the SBA lender only approves a loan for a portion of the purchase price, does anyone have any recommendations for alternative/ private lenders that specialize in software, subscription, etc. that might be a good fit to contact?

One that I've taken a look at is Boopos, but they have very high interest rates.
FWIW I had previously been pre-qualified by the SBA for up to $5M, and plan on discussing seller financing.

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commentor profile
Reply by a lender
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA
I think your best bet is seller financing. With the SBA program you can do forgivable seller notes as well that can provide you protection and somewhat act as a reverse earn-out. With the quick growth, it is going to be hard to get most lenders on board, either SBA or conventional. I would be happy to discuss structuring options. You can reach me at redacted Good luck.
commentor profile
Reply by a searcher
in Boston, MA, USA
To bridge the gap between the target company's historical EBITDA and the recent spike, you might want to consider an earn-out arrangement. In addition to agreeing upon the base purchase price, reflecting the $320K EBITDA, then set performance goals tied to the increased EBITDA of $1.08M annually and pay that additional EBITDA at the agreed multiple from future earnings.
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