Whether as a side hustle of full-time gig, buying a website or online business is growing in popularity.
If you’re a digital entrepreneur, rather than start from scratch, it can make sense to buy an existing digital property, one with some monthly recurring revenue (MRR), robust content, domain authority, customers, visitors and/or subscribers, etc. and then put in the time and effort it takes to grow your site, later selling it for a tidy profit.
Searching for an online business to buy is easier than you may think. Here are some of the best places to start looking:
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Funding an online business
Raising the money to buy any business takes time. Although an online business can typically be started with less money than a bricks-and-mortar company, it can be important to have readily available funds before you find your business, especially for online competitive bidding environments.
So, start early and use one of the many “how much can I afford?” calculators available to you online. If you’re looking to borrow money from banks or other lenders, we’d also recommend going through a prequalification and/or and application process early on in your acquisition journey.
The best way to finance an online business is dependent upon many factors, but here are at least 9 funding sources to buy a website or online business acquisition ambitions.
1. Friends and family
Most entrepreneurs turn to family and friends for money at some point. People who trust you can be incredibly valuable resources and a potentially interest-free way to raise starting capital. If you’ve exhausted this option, there are a number of other options available, all with varying degrees of risk.
2. Personal savings
Since many online businesses have low overhead costs and start-up expenses, many entrepreneurs choose to finance them with their own personal savings. However, some entrepreneurs simply don’t have the luxury of this option or aren’t willing to take this level of risk.
3. Investors
Angel investors are always on the lookout for the next business to invest in. Many of the biggest tech companies today, including Google and Yahoo, were funded by angel investors. There are established networks of Angels around the US that make them fairly easy to target.
Bear in mind that taking money from an angel almost always requires you to give your investor some share of equity in your company and Angel-related transactions must be registered with the Securities and Exchange Commission (SEC).
4. Retirement rollover
The Rollover as Business Startup (ROBS) program is essentially a process of reallocating your 401(k) or IRA investments to your own (new) company. A big advantage here is that you’re using your own money and not taking on debt and you can pay yourself a salary from the start.
But, be cautious – rolling over the funds you’ve saved for retirement is risky and unless you have more than $50,000 in your retirement fund, this may not be a viable option. While it sounds simple, the process can be complex and might require an experienced third party to ensure it goes smoothly.
5. Home equity loan
Borrowing against the home remains a fairly common option for entrepreneurs in need of start-up capital – but losing your home is a serious risk if you can’t make your loan payments. A home equity loan is comparatively easier to get than other loans and you have basically two options:
- Standard Home Equity Loan – This works like a mortgage – you borrow a large sum and make fixed monthly payments with interest that’s likely tax-deductible.
- Home Equity Line of Credit (HELOC) – This type of loan gives you access to smaller sums as you need them up to a fixed amount determined before you sign for it.
6. Unsecured loans
An unsecured business loan or line of credit is supported only by the borrower’s creditworthiness, rather than by any collateral, such as property or other assets. Credit cards are another form of an unsecured loan.
Unsecured loans are riskier than secured loans for lenders, so they require higher credit scores for approval and typically have somewhat higher interest rates.
If a borrower defaults on an unsecured loan, the lender may commission a collection agency to collect the debt or take the borrower to court. Unsecured loans are usually one of the fastest ways to get money for a major purchase.
There are such a plethora of unsecured lenders, including new online-only lenders, so it makes sense to find a trusted advisor to ensure you’re getting the best deal.
7. Securities-backed line of credit
As long as they’re not part of a qualified retirement plan, you can also borrow against assets like stocks, bonds and mutual funds. A securities-backed line of credit allows you to access funding based on the value of your portfolio without having to liquidate those assets.
It’s a good way to get money and still maintain your long-term investments. The approval and distribution process typically takes fewer than 10 days. Of course, not all digital entrepreneurs have such assets.
8. SBA loans
One of the most common routes to is a business acquisition loan guaranteed by the Small Business Administration. The SBA doesn’t disperse loans directly to the borrower. Instead, they approve loan applications forwarded to them by an authorized lender – usually a bank.
The SBA backs certain loans intended to start and grow small businesses up to 90%, minimizing the financial risk both for you, the borrow and future business owner, as well as the lender. The SBA is strict about who they accept, so the process can be tricky.
There is a significant amount of paperwork and SBA loans are not always ideal for small, start-up websites. If it’s the right fit, you’ll likely see lower interest rates, lower down payments, lower payments and more flexible terms than standard lenders on loans up to $5M.
9. Crowdfunding
Since crowdfunding platforms like Kickstarter, Indiegogo, and GoFundMe live online, it makes sense for an online company to pursue financing on one of these sites.
For a relatively low fee (usually a percentage of the total money raised), entrepreneurs can launch a campaign to fund their project. Crowdfunding isn’t a great option for long-term financing, but it can help you land the initial cash you need to get an endeavor off the ground.
However, if you don’t meet your fundraising goal, supporters will not be charged, and you will not receive any money from the campaign.
You can do this
In many ways, whether online or offline, raising money to buy a business is the same. The good news is that now, more than ever, there are many fundraising options available to get your dreams off the ground.
If you have any other questions about funding the purchase of an online business, website, or off-line business, Jumpstart Finance can help. For over 30 years, we’ve been specializing in helping entrepreneurs find the money they need to buy — both online and offline – businesses.