When to Structure an All-Cash Website Purchase
Website sellers prefer to receive all-cash from buyers for their websites. But as a general rule of thumb, website deals over $100,000 generally involve some form of seller financing. So an all-cash deal usually applies to deals under $100,000.
Of course, these rules are not carved in stone. Some website sales under $100,000 involve seller financing. The structure of any deal depends on the buyer and seller involved as well as the type of website for sale.
An aged & established website with long steady revenue is considered to be a low-risk investment. In this case, a buyer may feel comfortable paying all-cash for the website even if the sale price is over $100,000. The website has a lot of history which gives the buyer peace of mind that it will continue to grow at its historical rate.
On the other hand, a website that is much younger may be considered a slightly higher-risk investment. With a shorter history, a buyer may insist on a deal including seller financing even if the sale price is under $100,000.
Why do buyers seek seller financing?
The first reason is traditional lenders do not finance website purchases. Therefore, the most appropriate form of financing comes from the website seller. The buyer makes a cash down-payment and scheduled debt payments over a period of time.
The second reason is if a seller is open to seller financing, then the seller has a stake in the future of the buyer’s new business. It tells the buyer that the seller is confident that the website will continue to do well in the future. This makes buyers feel more secure and gives them more incentive to close the deal.
In some instances, if a seller refuses to offer seller financing, especially on a high-priced sale, many buyers will instantly pull out of the deal. Buyers interpret it as a red flag. If the seller doesn’t want to finance part of the sale, then there must be something wrong with the website. This may be a completely inaccurate assumption but that’s how many buyers would interpret it.
In a nutshell, website deals under $100,000 are generally all-cash. The smaller the sale price, the more likely the deal will be an all-cash deal. Website deals over $100,000 generally involve seller financing.
But there are no fixed rules. Every deal is different. The final sale structure depends on the buyer, seller, and website for sale.
Author: Kris Tabetando
Kris Tabetando provides mergers & acquisitions (M&A) advisory and brokerage services to Internet companies. He also partners with investors to acquire & manage Internet businesses.
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