Domain Name Financing

premium domain names

Domain Names Are Financed Everyday

Looking to buy a premium domain but don’t have enough cash to complete the sale? You are not alone!  Many buyers want to buy a specific domain to launch a new business or product but do not have the cash on hand needed to close the deal.  The need for domain financing is great because aftermarket domain retail pricing can be extremely high; making it nearly impossible for many willing buyers to get the domain they want.  We all know what the value of a good domain name can be and the marketing benefits that comes with them.  So we’ve put together a comprehensive guide on how you can find the premium domain name you want and acquire it by structuring several types of different kind of deals.  If you do determine that you need some extra capital to get a deal done, please reach out to us for domain financing options we can offer to you.

Domain Financing Rates, Terms & Process

Here is an overview of what you can expect from a domain financing solution from Lendvo.  Keep in mind that we are flexible and able to custom fit a solution to meet your needs and this should be used as a guide.  For more information, please reach out.

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Financing Amounts

  • We are able to provide solutions that can bring up to $100,000 per domain name transaction. For larger deals, we may still be able to help so it is always worth reaching out to see what we can do.

Financing Rates:

  • Rates for domain loan financing can range depending on the quality of the domain name and the quality of the buyer. As a general rule of thumb, you can expect a rate between 1% and 3% a month depending on the deal.

Loan Duration:

  • We pride ourselves on providing capital very quickly and in a flexible manner. We can structure loans ranging in length from as short as 1 month to as long as 2 years.

Custom Terms

  • We are specialists in domain name lending, and often times can find creative solutions for buyers and sellers to create transactions that everyone is happy with.

Traditional Domain Financing Options

These are really the three ways to get financing to buy a premium domain name.  Granted there might be other ways like borrowing money from friends and family, but from a business marketplace point of view this is what it is.  The following is a list of current domain name loan providers in the industry, and a comprehensive guide on structuring deals.

Domain Financing Companies:

There are only a few companies on the market that specialize in domain name loans. However most domain financing companies require large down payments (usually 40% down, Lendvo.com will work with as little as 25% down) and charge high interest rates (Lendvo charges competitive interest rates).  At Lendvo, we specialize in lending on domain names and can offer you competitive financing options that are custom tailored for your situation and closing the deal.  One thing that is great about our domain financing options are that we pride ourselves on moving fast.  Really fast!  Often times you’ll know within a day what we can do to help you acquire the domain name.

Traditional Bank Loans:

While it is possible to get a domain loan from a traditional bank it is very difficult. Primarily this is because traditional banks have issues with valuations. Frankly, traditional banks will just eat up a lot of time and won’t be able to underwrite a loan based on just a domain name.  You’ll drive yourself crazy trying to convince the loan officer what the value is and ultimately they won’t be able to get approval unless “corporate” signs off (which they won’t).

Credit Cards:

A ready source of domain financing, but at a very high price. If you are considering using a credit card for the capital needed to buy a domain name you are probably better off running your situation by a company like ours for a more competitive rate on the transaction.  Also, working with a specialty lender like Lendvo, we will better understand your business and domain name assets and can tailor something that makes much more sense.

What Makes Us Specialists In Lending On Domain Names

Because of their nature, domain assets can be very difficult to value. However for any financial institution to extend a domain name loan they must establish a baseline valuation for the asset they are financing.  Three of the biggest problems with determining domain value are:

1. Asset Valuation Difficulties:

  • Lack of a standardized valuation method: Unlike cars which have standardized blue book values, there is no standardization method for valuing a domain. In fact there are many characteristics people use to value a domain including name length, traffic stats, PageRank (and other SEO related stats), how memorable the name is, extension type, etc. Some Tools people use for domain valuation can produce results that greatly vary. Some options out there are www.estibot.com and www.domainindex.com. Also, you can look at historical prices from dnjournal.com and sites like that.
  • Lack of access to comparable values: Unlike real estate which has well documented sales value (including previous sales) the domain market is not transparent. This is due to many reasons including an abundance of private sales (which go unreported) and sales where the parties mandate non-disclosure. However there are some decent sources including DNJournal and http://www.dnsaleprice.com/
  • Estimated future value: A huge variable in the valuation of a domain is how valuable it will be when it’s fully developed (or paired with a solid business model). This factor is completely objective and varies from person to person. Taking a look at google trends and other types of indicators could be helpful in providing some insight into the future.

2. Asset Liquidity:

  • While there are many outlets to sell domains, actually completing a domain name sale is a trying task. Ironically the lack of liquidity is due to (and caused by) the difficulties of getting a domain loan. This makes it very hard for finance providers to liquidate domains they receive in the event of a buyer default.

3. Lack of Domain Loan Providers:

  • The uncertainty surrounding domain valuation deters a lot of traditional financing outlets from providing domain name loans. Additionally liquidity issues result in the need for domain loan providers to be ultra-selective to applicants.

4. High Screening Standards:

  • Due to the current economic climate and the volatile aspects of domain names, domain financing providers have high screening standards for applicants.

5. Interest Rates:

  • Annual interest rates vary for domain name loans, but typically fall into the range of 1% to 3% per month for amortizing loans and the range can be a bit different for interest only loans.

6. High Mandatory Down Payments:

  • Most domain loan providers will only lend up to 60% of the domains value. While this practice helps ensure that providers will be able to liquidize the domain, it is a huge barrier to some buyers who cannot afford a down payment of 40% of the domains price.

7. Low Valuation by Financing Provider:

  • Domain name financing providers typically determine the value of a domain and use their valuation to determine the terms of the domain loan. This is an issue because their valuation may differ from the price that the buyer and seller agreed on. This results in the buyer not being able to borrow enough of the required funds for the sale.

Owner (Seller) Financing As An Option

There are two great solutions to the current problems of domain name financing: owner financing and domain leasing. Often times, utilizing this type of an approach in conjunction with a domain name loan from us is enough to close a deal successfully. Both options allow buyers and sellers to conduct transactions of high value domains using monthly payments.  Owner financing is a domain loan provided directly by the seller (domain owner). Essentially the domain owner allows the buyer to pay the purchase price over monthly installments.  Domain Name Leasing provides buyers the right to temporarily use the domain for a specified period of time (lease period).

What is Owner/Seller Financing Of Domain Names

Owner financed domain sales are transactions where the owner of the domain allows the buyer to pay the sales price of domain in periodic installments instead of all at once. The seller basically “holds paper” for the buyer, providing him with a personal loan. Owner financing is a great way for buyers to get access to premium (high value) domains without the high upfront costs of norm or high costs and hassle of a traditional loan.  Lendvo can work together with seller financing to create a structured domain acquisition deal that is catered to the needs of all parties.  These types of hybrid payment structures help to manage monthly payments while allowing the seller to get a lump sum of cash at the start (which is what they all want).

Typical Terms Of An Owner/Seller Financed Domain Sale

Loan (transaction) term:
Owner financed loans are usually between 2 years – 10 years in length. Monthly or quarterly payments seem to be the standard.

Down payment:
Usually owners will demand that the buyer pays a non-refundable down payment at the start of the transaction.

Payment Amount:
The periodic payment amount calculated as Principle + Interest.

Interest Rate:
Annual interest rate charged by the owner for providing financing to the buyer.

Transaction Example

Sarah wants to buy the premium domain name Example.com to start a new business. Historically Example.com earned an average of $250 a month from parking. Sarah and George (the owner of Example.com) agree on a sale price of $60,000 but Sarah doesn’t have the cash to buy the domain. Sarah and George later agree to a owner financed sale containing the following terms:

  • Finance Period: 3 years (36 months)
  • Down Payment: $0.00
  • Annual interest rate: 10%
  • Monthly Payment Amount: $1,833.34

Let’s examine the benefits of owner financing to buyers and sellers using the above example:

BUYER’S BENEFITS

Domain Use:
Sarah is able to acquire and fully use the domain to start her new business. She develops a great website on the domain filled with original content. She also invests in marketing and promotion for the site.

Easier than financing:
Since the terms of the lease are created directly by the seller and buyer, Sarah avoids the hassles and high costs of domain financing. If Sarah had to take out a traditional domain loan she would have had to put down $24,000. It would also cost her 15%-25% annual interest.

Domain ownership:
Once Sarah pays the loan in full she will completely own the domain.

OWNER BENEFITS

Sell your domain: 

George is able to sell his domain, something he has been trying to do for several years. He will potentially be able to get way above his asking price ($78,000 instead of his $60,000 asking price).

Earn high monthly loan payments:
George collects a monthly payment of $1,833.34. That is nearly 8 times higher than his historical monthly earnings from parking ($250).

Increased domain value:
During the seller financing period the domain’s value increases as Sarah builds a great site that gets traffic, search engine rankings, links, and PageRank. If Sarah defaults or decides not to buy the domain, George will get it back and retain all previous payments.

SELLER FINANCING ISSUES

There are, however, security concerns from both parties regarding seller financing:

Buyers are concerned about the owner disrupting the transaction (canceling it or changing the DNS settings) during the sale term.

Owners, on the other hand, are generally concerned with how the buyer uses the domain while they make monthly payments. The buyer can do a number of things to devalue the domain including unauthorized use of trademark or copyright material, using the domain for any illegal purpose, using the domain for SPAM, or conducting “Black-hat” SEO techniques.

Domain name financing providers typically determine the value of a domain and use their valuation to determine the terms of the domain loan. This is an issue because their valuation may differ from the price that the buyer and seller agreed on. This results in the buyer not being able to borrow enough of the required funds for the sale.

Domain Use:
Sarah is able to acquire and fully use the domain to start her new business. She develops a great website on the domain filled with original content. She also invests in marketing and promotion for the site.

Easier than financing:
Since the terms of the lease are created directly by the seller and buyer, Sarah avoids the hassles and high costs of domain financing. If Sarah had to take out a traditional domain loan she would have had to put down $24,000. It would also cost her 15%-25% annual interest.

Domain ownership:
Once Sarah pays the loan in full she will completely own the domain.