E197: E-commerce & SaaS Acquisitions Financing: Expert Stephen Speer on Funding Your Business Dreams - Watch Here

About the Guest(s):

Stephen Speer is a seasoned lending expert with a specialization in business acquisitions financing. Bringing with him the wisdom that comes with a long-standing career in finance, as evidenced by his hair color, Speer stands out for focusing on the e-commerce and SaaS spaces over the past decade. His experience culminates in over 500 transactions, racking up a total of over a billion dollars in financing. At present, Stephen is deeply involved with the M&A community and enjoys assisting both groups and individuals in the acquisition of businesses.

Episode Summary:

In this insightful podcast episode of 'How2Exit,' host Ronald Skelton welcomes Stephen Speer, a distinguished expert in the field of business acquisitions and financing. This episode delves deep into the intricate processes and strategies around selling small businesses and acquiring the necessary financing.

Stephen Speer's extensive experience in lending, particularly within the realms of e-commerce, SaaS, and small business financing, offers an invaluable discussion for individuals interested in exiting corporate America to run their own business and seasoned investors alike. With a meticulous approach to lending, his company, eCommerce Lending, demonstrates a remarkable loan approval rate, highlighting their success in guiding clients through the complexities of business acquisition. With tailored advice and an insightful exchange, this conversation is a beacon for budding entrepreneurs and acquisition experts navigating the finance landscape.

Key Takeaways:

• Pre-qualification is essential: Prospective buyers should get pre-qualified early on and work with lenders to vet businesses before making offers.

• Building a solid acquisition team: Equip yourself with the right attorney, lender, and due diligence firm to ensure acquisition success.

• Understand the timeline: SBA financing typically operates on a 60-day timeline, with other business acquisitions following suit based on buyer readiness.

• Avoid bad deals: Guided by the wisdom that "bad deals only get worse," Speer advises caution and due diligence in selecting opportunities.

• Trust specialized lenders: eCommerce and SaaS financing comes with unique challenges that require expertise beyond what standard banking institutions offer.

Notable Quotes:

• "We do a lot of SBA financing, and what sets us apart is that we're very much specialized in doing SBA financing within the online business space."

• "If we just don't like either the client or the business, we move on to the next. We're not into doing bad loans or working with people that we can't get financed."

• "We're not in the scratch and dent business. We mostly look at businesses that are growing year over year."

• "We have had clients in the past say, well, I don't want to hire an attorney. And we're like, we're out."

Article:

Navigating the E-commerce Acquisition Landscape: Expert Insights from Stephen Speer

When it comes to buying small businesses, the road to acquisition is often complex, particularly in the e-commerce and SaaS spaces. In a comprehensive discussion with Ronald Skelton from the How to Exit podcast, Stephen Speer of eCommerce Lending shares invaluable insights into the world of business financing and acquisition. His expertise offers a beacon for those navigating the intricate process of buying an online business, highlighting the importance of proper preparation and the nuances of different financing options.

Key Takeaways:

• Acquiring an online business requires careful pre-qualification of both the buyer and the target business to ensure successful financing.

• SBA loans are a significant avenue for funding small business acquisitions, but they come with stringent qualifications that need specialized handling.

• For larger transactions in the lower middle market, different financing structures are utilized, often free from the need for personal guarantees.

Understanding the Pre-Qualification Process

The first theme that Speer shines a light on is the cruciality of the pre-qualification process for potential buyers. It is clear that this step is not simply about assessing financial ability—it’s about ensuring a strategic fit between the buyer’s skills and the business they wish to acquire.

Why Buyers Need to Pre-Qualify Early

Pre-qualifying early on allows potential buyers to approach the search for an ecommerce or SaaS business with confidence, knowing what they can afford and what fits their skill set. Speer highlights, "Our process normally starts when people are ready to go look for a business... we deep dive and really find out what they're looking for."

Vetting Businesses for Financing

Speer emphasizes that not just buyers but businesses too must be vetted for financing. E-commerce Lending examines the financials and cash flow of a business to ensure it can adequately service any debt incurred from the acquisition. "We basically cash flow the business and look at how the business is obtaining revenue," Speer explains, underlining the importance of such due diligence.

Financing Options for E-commerce and SaaS Acquisitions

Financing is invariably a cornerstone of business acquisition, something Speer has extensive experience with. His conversation with Skelton ventures into the various options available for buyers in different brackets of acquisitions, from SBA loans to private equity-backed deals.

SBA Loans and Their Nuances

While SBA loans are a significant segment of the market for business acquisitions, they come with particular strictures and requirements. Speer notes, “SBA requires a personal guarantee. And if there's available collateral, which is typically limited only to maybe a primary residence where they'll put a lien on the house."

Financing for Larger Deals

For transactions in the lower middle market (ranging from approximately $10 million to $250 million), the structure is vastly different. These financing options often don't require personal guarantees, as they involve corporations acquiring other companies. Speer specifies, “They have no recourse. They don't require a personal guarantee. Every once in a while they do, but it's very rare."

The Essential Nature of the Acquisition Team

The third significant theme Speer iterates is the necessity of compiling the right acquisition team. A solid team does more than facilitate the acquisition process; it ensures that all aspects of the deal are scrutinized, protecting the buyer from potential oversights or pitfalls.

Role of the Acquisition Team

Building an acquisition team is not simply about having the right players in place—it's about leveraging expertise across different domains: legal, financial, and operational. Speer drives home the point that lacking any single component on this team, such as legal counsel, could be a deal-breaker: "If you don't hire an attorney, we're not working with you."

The Importance of Guidance and Education

For new buyers, especially those leaving corporate America to run their businesses, the acquisition team plays an educational role, guiding them through unfamiliar terrain. Speer and his firm's involvement from the initial search phases to the final closing ensures that buyers are not left to tackle complex decisions in isolation.

Seamless Acquisition Journey and Ensuring Success

To encapsulate Spear's insights, embarking on a business acquisition, particularly in the e-commerce and SaaS arenas, requires an alliance of extensive preparation, industry-specific financing knowledge, and comprehensive support from an experienced acquisition team.

Potential buyers aiming for success in this competitive space must adhere to the following strategies: diligently pursue pre-qualification, explore suitable financing options, and construct an expert-backed acquisition team. Heeding these principles not only maximizes the chances of a successful acquisition but also reinforces the transaction's financial integrity for the long haul.

Stephen Speer's expertise, as shared with Ronald Skelton, lays bare the intricacies of the e-commerce acquisition landscape, offering invaluable counsel for those aspiring to navigate its challenges with confidence and finesse.

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