LoanBud Champions Small Business Acquisitions Banks Overlooked

Introducing LoanBud Acquire

Burke Purcell, who has dedicated his career to assisting self-employed entrepreneurs, has taken a significant step with the launch of LoanBud, a new fintech platform. After witnessing numerous self-employed clients struggling to find effective business loans, he established LoanBud Acquire to bridge the gap between buyers and sellers of small businesses with sale prices ranging from $100,000 to $350,000.

This innovative marketplace operates outside the usual Small Business Administration (SBA) loan framework. Instead, it focuses on established businesses with prequalified buyers who are willing to provide a 15% equity investment.

A New Partnership Opportunity

Currently, LoanBud Acquire is collaborating with a select group of capital providers. However, with increasing interest in the program, Purcell is actively seeking additional partnerships with banks and credit unions to enhance funding options.

“We would love participation in this program,” said Purcell. “The more liquidity that seeks to enter this space, the stronger we become.”

Despite their interest in expanding partnerships, Purcell noted a significant challenge: many banks remain hesitant to engage in small-dollar acquisition loans. Although LoanBud's SBA marketplace has successfully partnered with over 50 banks, few are interested in smaller loans.

The Challenges of Small-Dollar Acquisitions

For years, banks have largely avoided financing small-dollar business acquisitions, primarily due to the lengthy underwriting process, which is comparable to larger transactions. Additionally, some lenders are concerned about whether small businesses can manage the requisite debt. The absence of an SBA loan guarantee further complicates matters.

Consequently, most small acquisitions are funded through buyer capital or seller financing, leaving many smaller businesses without access to essential financing. Purcell asserts that the existing options often fail to accommodate the unique needs of owner-operated businesses.

Expert Insights on Financing Opportunities

Joseph Steigman, the founder of a brokerage in Nashville specializing in selling small businesses, reiterated the difficulties in securing bank interest for smaller deals. Though some lenders may consider these transactions, finding those willing to do so can be challenging.

“The banks that are open to these deals are few and far between,” noted Steigman.

Although he understands the complexities in underwriting these loans, Steigman believes that banks often miss out on valuable, creditworthy customers by neglecting smaller transactions.

“By considering the borrower’s experience and access to capital, the attractiveness of these deals can significantly improve,” said Steigman. “If a potential owner has personal capital or stable income streams, and the business itself has strong fundamentals and growth potential, then leveraging the acquisition could benefit both parties.”

Having utilized LoanBud himself, Steigman sees great potential in technology platforms like LoanBud, which can effectively assess a small acquisition borrower’s experience and financial background.

The First Successful Acquisition

Launched in 2022, LoanBud has already achieved its first success with a $350,000 loan facilitating the sale of a sushi restaurant in Texas. Purcell is optimistic that this initial transaction will pave the way for many more, aiming to transform a sector he describes as greatly underserved.

“An acquisition of $250,000 is just as significant for the buyer, the seller, and the employees as a multi-million-dollar deal,” stated Purcell.