IMX Exchange Inc.'s decision last week to indefinitely postpone its initial public offering shows how difficult it has become for Internet mortgage firms to raise capital - even those that bill themselves as business-to-business firms.

San Ramon, Calif.-based IMX, an online exchange that connects mortgage brokers and lenders, withdrew a public offering it had been planning since March, citing "general market conditions." It had hoped to raise $57.5 million by May. Erin Esparza, senior vice president of strategy and business development at IMX, said market conditions had changed since the company's March filing, prompting its board of directors to shelve the offering. She added that while it was waiting to sell shares to the public IMX was hampered in marketing its business to potential customers by the mandated regulatory quiet period. "We really have a great story, and we want to be able to freely get that story out to our audiences - be promotional, market to our audiences - and when you are in the quiet period, you're restricted from doing that."

Ms. Esparza said IMX has alternative sources of funding, including cash on hand and access to private capital if the need arises.

At yearend the company had $6.8 million of cash, cash equivalents, and short-term investments, and it had working capital of $4.4 million, according to the IPO prospectus. It raised $15.7 million from private investors in March.

The IPO withdrawal, however, may begin a challenging period for IMX - and many other mortgage-related Internet companies. "If you're involved in the mortgage origination business, this is a difficult time in the cycle to attract capital, at least public capital," said Art Bender, an analyst at Credit Suisse First Boston.

Mr. Bender said IMX's business model faces hurdles. "The problem that a lot of these companies have is that the current system of exchanging information between brokers and lenders actually works pretty well for most brokers," he said.

Most brokers have relationships with three or four lenders and are reluctant to work with lenders with which they are not familiar, Mr. Bender said. "And there's not all that big of a pricing differential" between selling a loan on an online exchange and selling it to a lender the old-fashioned way.

But IMX remains optimistic. "We've done over $2 billion in transactions, and that's still a very small share of the market overall," Ms. Esparza said. "We'll just keep an eye on the market conditions, and when the board and their advisers believe that it's the right time, they'll refile."

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