Ability to Repay
In website investing, “ability to repay” refers to the ability of a website buyer who has received seller financing in a website sale to make the scheduled future payments and pay off the entire debt.
Generally, in a seller-financed deal, the website cash-flow is used to pay down the debt. As such, a seller or his broker must structure the financing to ensure that the website can actually comfortably afford to make the debt payments.
Otherwise, the buyer may default on the debt and the seller will not receive full payment for the website. Of course, the seller can foreclose on the debt’s collateral. But this situation can be avoided by ensuring that the buyer is able to repay the loan in the first place.
This is similar to a bank verifying the income & debt of a loan applicant to make sure that the applicant is able to repay the loan.
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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