U.S. fintech company LoanBud is moving to target the small-ticket small business acquisition finance market that banks and credit unions have shunned. It aims to link small business acquisition deals that have struggled to secure funding because profitability is low relative to the cost and time required for loan reviews.

According to American Banker, LoanBud last month launched its small business acquisition finance platform, LoanBud Acquire, and began seeking financial institution partners. The platform links $10,000 to $350,000 in funding to buyers seeking to acquire existing small businesses. It operates without loan guarantees from the U.S. Small Business Administration (SBA), and buyers must cover at least 15 percent of total project costs with equity.

It does not require real estate collateral and aims to close loans within 30 days for eligible deals. It reviews the business's cash flow, the buyer's management experience and repayment ability.

LoanBud founder and Chief Executive Burke Purcell (버크 퍼셀) said more than 50 bank partners participate in its existing SBA loan platform, but few are looking to handle small-ticket business acquisition loans at scale.

The biggest reason banks avoid small-ticket deals is the underwriting burden. Even if the transaction amount is small, the time and staffing needed to verify enterprise value, financial conditions and the borrower's repayment ability are similar to large deals. The lack of an SBA guarantee is also a burden.

As a result, small business acquisitions often rely on the buyer's equity or on "seller financing," in which the seller lends part of the purchase price.

LoanBud recently arranged its first acquisition loan, worth $350,000, to support the sale of a sushi restaurant in Texas. The company plans to use the deal to encourage additional participation from banks and credit unions.

Legacy Entrepreneurs CEO Joseph Steigman (조지프 스타이그먼) said lenders could miss strong borrowers if they judge deals solely by size. He said a buyer's experience and capital capacity, along with the growth potential of the acquisition target, should be evaluated together.

LoanBud expects that standardising borrowers' financial information and management experience through its technology platform can improve underwriting efficiency for small-ticket acquisition loans and broaden participation by financial institutions.