discuss Designing a domain loan service

legendarynames said:

I'm pondering what hurdles there would be in offering a loan service with domains as collateral, and if there would be a significant market for this niche.

Initially the idea would be to focus on traffic portfolios with proven parking revenue. The borrower would transfer over their portfolio to an escrow account at our Registrar, and the parking revenue would be used to offset the loan balance.

The total loan amount would be a multiplier of past parking revenue, and if the borrower doesn't pay back in due time, we'd keep the domains.

If the service evolves, other domains could be accepted as well.

I understand Epik provides interest free domain loans, but AFAIK, they give you registrar credit for helping keeping up with domain renewals, not cash for private use. I'm not aware of other services.

Criticisms?

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Well - for one, you would have to have a way to verify the numbers. Think about the underwriting process a bank or a lender goes through. Second, you have to have a good understanding of both state and federal law. What is a legal interest rate to charge (for example)? What is the process you are required to follow in that state/jurisdiction if you are seizing a domain? Things like that. It's those details that can really make it a miserable business if you are going through a long and costly legal process to recover your money.

Second, how will you go about designing an interest rate that captures all the risks? A rate is the sum of all risks (liquidity, credit, etc). You also have to have a strong ownership verification process in this post GDPR age. These are just some of the broader questions to start with.

Domain Capital has over 10 years of experience in this space. I think there may be one or two others I am missing off the top of my head.

Ivan Rasskazov said:

Well - for one, you would have to have a way to verify the numbers. Think about the underwriting process a bank or a lender goes through. Second, you have to have a good understanding of both state and federal law. What is a legal interest rate to charge (for example)? What is the process you are required to follow in that state/jurisdiction if you are seizing a domain? Things like that. It's those details that can really make it a miserable business if you are going through a long and costly legal process to recover your money.

Second, how will you go about designing an interest rate that captures all the risks? A rate is the sum of all risks (liquidity, credit, etc). You also have to have a strong ownership verification process in this post GDPR age. These are just some of the broader questions to start with.

Domain Capital has over 10 years of experience in this space. I think there may be one or two others I am missing off the top of my head.

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Very thoughtful, thanks. I thought of offering specifically to traffic portfolios because, one way or the other, I'd recover the money even in case of a default. I wouldn't have to seek repayment in the courts.

The fact that the portfolio generates revenue and that we'd be transferring the domains over to my own registrar allow for a low interest rate. Part of the interest can be embedded in the transfer/renewal margin.

I imagine the business wouldn't have to be incorporated in the US and that there are other jurisdictions which are more friendly to this kind of arrangement.

I'll check DomainCapital, thanks.

In the near future this concept will most likely be applied when domain assets are tokenized and recorded on a blockchain. The asset tokens would then be used as collateral for a loan. We are already seeing this in other areas. I see no reason it wouldn't work for domains. Many are calling this "DeFi."

Internet.Domains said:

In the near future this concept will most likely be applied when domain assets are tokenized and recorded on a blockchain. The asset tokens would then be used as collateral for a loan. We are already seeing this in other areas. I see no reason it wouldn't work for domains. Many are calling this "DeFi."

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You're spot on! What I'm proposing might be one way or the other be already facilitated by DAN.com. But I'm wondering if there is enough demand to justify.

A few companies already do this..........

http://intelend.com

https://domr.com/loan-faqs

http://domaincapital.com

probably more if you search......

legendarynames said:

You're spot on! What I'm proposing might be one way or the other be already facilitated by DAN.com. But I'm wondering if there is enough demand to justify.

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Once there is liquidity the demand will quickly follow.

MrAcidic said:

A few companies already do this..........

http://intelend.com

https://domr.com/loan-faqs

http://domaincapital.com

probably more if you search......

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It's a different niche as I see it... they're mostly looking for single premium domains. I'm looking for traffic portfolios with proven revenue history.

legendarynames said:

Initially the idea would be to focus on traffic portfolios with proven parking revenue.

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lol .. that's a good one!

First of all, I'm not sure how many parking portfolios are even out there. Specifically ones where the parking revenue is significant compared to the value of the domain. Of the very few portfolios that are, they are probably the least likely to even be looking for loans.

More importantly, in 2019 I really don't think the math is going to work out for you. With today's minimal parking revenue, I'm thinking most of the domains that have traffic would be worth far more than a reasonable multiple of the actual parking revenue.

On the high side I think you'd be lucky if 1% of domainers would even fall into your defined target market .. more like 0.1% .. and again .. those would be the ones with a lot of success who definitely would not be interested in what would need to be unfavourable lending conditions compared to what they could likely get via conventional means.

Beyond that, if the parking revenue was "proven" and significant .. then the domain owner would likely only want to put up the parking revenue up as collateral as opposed to the actual domain.

I wish you luck, as it's always a good thing for all of us to have more domaining options .. but unfortunately I don't think it's realistic in any way if you're simply going to base it on parking.

legendarynames said:

I understand Epik provides interest free domain loans, but AFAIK, they give you registrar credit for helping keeping up with domain renewals, not cash for private use. I'm not aware of other services.

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As far as I know I don't think that's true .. really not sure and would be best to ask @Rob Monster to confirm the specifics.

You know, I've been hearing parking is dead for the last 10 years, but I still make enough to cover half of my portfolio renewal cost, and that's because I sold lots of traffic names a while back. Otherwise it'd be 100%.

I have 5 or 6 names that make north of $30 per month consistently, and have been doing so for over an year. My #1 top domain makes $2,000 per year (7 years record).

Bodis has 80,000 accounts, and if you ask here in this forum you'll see some people still make high three figures monthly out of parking.

So no, in 2019 parking isn't dead. At all.

A portfolio that makes $200 per month could be entitled to a $3k loan with little risk on my side. For some people, $3k is enough to start a new business.

And yes, the loan could be repaid entirely in parking revenue, but giving the borrower the option of earlier repayment is only fair.

1) starting a new business with only $ 3000 is very ambitious to say the least ...
2) parking is dead ... while I still after 17 years can pay for all my renewals with only 20 % of my domains bring income domains ... I consider myself very fortunate and probably only one of a few hundred that can do that ... but the parking income is only a small fraction of what it once was ... at the best of times one made huge profits each month with parking only ... it has gone down for 10 years and never had an upswing ever ... at this point I think it is very save to say that it will not recover or increase in anyway ... so you have indead a very very small amount of people as your potential costumer base ... a very small amount ...
3 ) I personally would never seek a loan for such a small amount % and give my livelihood as collateral .

It's your business and your idea ... so I'm not telling you what to do .. I'm just giving you my opinion . I personally think giving loans for domains is a fantastic idea ... I just don't think the traffic monetizing avenue ankle works ...

Best of luck

Lendvo.com is another company that does it:

https://www.lendvo.com/

legendarynames said:

And yes, the loan could be repaid entirely in parking revenue, but giving the borrower the option of earlier repayment is only fair.

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That is certainly a nice option to have, I think. But as others have said. I wonder how small this market is. I for one, would be unlikely to hand over my best domains as collateral, for a loan. Domaining is still the Wild West. Without a solid track record. Who is likely to go to a start-up? Let alone the biggest player in the market? What happens if you screw-up their parking revenues? It's risky for the domain owner, as well as for the financer.

I used to get spammed daily on this stuff.

parking revenue just part of your credit evaluation. The focus of the problem is now in the risk assessment process. This is totally different.
Its risks are ownership control, changes in market demand (keywords or key topics), potential UDRP risks.
Just having a blockchain doesn't solve these problems and requires a combination of big data across the industry. I think maybe only Google can finish it. IMO.

legendarynames said:

I'm looking for traffic portfolios with proven revenue history.

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Hi

I think those with income producing domains, are less likely to use those names as collateral

if anything, you can take my names that don't produce revenue, which have received offers that I did not accept.



imo...