Financing an Online Business Acquisition: Interview with Stephen Speer

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Acquisition entrepreneurship is an attractive path for those who recognize the potential ROI of successful online businesses. However, the financial aspect of acquisitions often poses a significant challenge. To shed light on this critical topic, I sat down with Stephen Speer, the founder and CEO of eCommerce Lending, a premier financing institution that specializes in helping entrepreneurs navigate the complexities of funding online business acquisitions.

With his wealth of experience and deep industry knowledge, Stephen provides invaluable insights into the various financing options available to buyers and how they can effectively leverage these solutions to secure their dream online business.

During our conversation, Stephen covers the specifics of financing an online business acquisition and provides practical advice on what to expect during the process.

Please tell us about your background and how eCommerce Lending came about.

I’m Stephen Speer, the founder and CEO of eCommerce Lending, a firm specializing in financing acquisitions, acquisition advisory, and search services in the online space.

My team and I have decades of experience in the lending industry and we’ve used our expertise to assist hundreds of entrepreneurs in achieving business acquisition success.

As an e-commerce leader, guest speaker, and M&A instructor, my firm and I have funded over 500 transactions totaling over $1 billion, making us the top lender in the country in this very specialized niche.

Can you tell us about the types of loans and acquisitions that you deal with at eCommerce Lending? 

We provide SBA loans for lower-market acquisitions and finance businesses from $500,000 to roughly $8,000,000. Depending on the business’s cash flow, most of our deals only require a 10% injection (down payment). We look at the business’s historical cash flow and the buyer’s personal liquidity and business acumen for qualification.

We also finance larger transactions through private equity.  Our Capital Access Program serves lower-middle market clients who are acquiring businesses in the $10 million to $250 million price range. 

The main thing we bring to the table is expertise and an incredible track record in getting buyers past the finish line. For the past two and a half years, we’ve had a 100% loan approval rating, which is why buyers and business brokers engage us for financing. 

What are some common misconceptions entrepreneurs have about acquisition loans?

First, many entrepreneurs believe that they can buy a business with none of their own money. All lenders require that the buyer has his or her own “skin in the game.” 

Secondly, some think that it’s all about interest rate, when in fact, it’s about the lender’s ability to get the buyer approved and closed. We certainly have a good track record in that category.

Can you please explain the basic steps involved in the process of getting an acquisition loan?

Here are the five basic steps of buying an online business:

1. Get Pre-Qualified: This is the essential first step that determines the price point you qualify for and sets you up for a successful search. The pre-qualification step makes you more competitive among other buyers and increases your chances of having your offers accepted by sellers.
2. Contact a Business Broker: Reach out to a business broker proactively. Initiate a dialogue about your interests, price range, and timeline that will position you favorably when a business opportunity arises. 
3. Pre-Qualify the Business: Before making an offer, ensure that the business qualifies for financing. Businesses may not qualify for a variety of reasons such as short financial track records or not being in the US. We help clients pre-qualify businesses to determine if they qualify for financing.
4. Make Your Offer: First-time business buyers should consult professionals who do this for a living. Our team assists clients in creating their offers in a way that distinguishes them from the pack and bypasses common pitfalls. For instance, what many don’t know is that ‘earn-outs’ are not allowed in financing, and we help buyers structure their offers effectively.
5. Choose the Right Lender: The loan process can be daunting, so it’s crucial to select a lender with an efficient system and an understanding of the nuances of online business acquisition financing. At eCommerce Lending, we know what it takes to guide our buyer-clients through this intricate process.

What are the most important buyer qualification factors for an acquisition loan?

Personal liquidity and business acumen are the most important factors that help a buyer get approved for an acquisition loan.

On the business acumen side, the larger the price, the more focus on the buyer’s work experience matters. It becomes as much about the “jockey” as the “horse,” so the buyer’s experience is more important than any other factor.

What emerging trends or developments in the online business acquisition space should entrepreneurs be aware of, particularly in terms of financing options?

As of last year, buyers can do a partial buyout with an SBA loan and do not have to purchase 100% of a business, which wasn’t an option before.

They also have the option to keep the seller on and provide him with an equity stake. This is called an “equity roll” or “rolling equity.”

What advice would you give to entrepreneurs who are considering using acquisition loans to fund their online business purchases?

My advice is to get prequalified for a loan as soon as you start your search. Buyers typically aren’t given the opportunity to learn more about a seller’s business unless they’ve been vetted. So, getting prequalified is a necessary first step.

What current trends are you seeing in terms of loans and financing in 2024?

The credit markets have certainly tightened up, leading us to vet buyers more thoroughly than a few years ago. However, despite the higher interest rate environment, the acquisition market is as robust as ever, and opportunities exist.

If you’re interested in starting the process and getting pre-qualified, please visit eCommerce Lending‘s website for more details.