Domain Capital is known primarily for its domain name lending business. People who either need to finance a domain name purchase or use their valuable domain name as collateral for a loan can quickly turn to Domain Capital to receive funding for their domain names.
I was chatting with Vince Harasymiak and Gregg Freeman at The Domain Name Conference a couple of days ago, and they told me about another type of deal that could pique their interest: buying the payment stream for a domain name deal.
I will illustrate this with a rough example (i.e. don’t quote me on these figures): Let’s say I come to terms with a buyer to sell a very good domain name for $48,000 and the buyer will pay $2,000/month for 2 years. Domain Capital may be willing to pay me something like $40,000 at the time of the deal, and they will collect the monthly payments for two years. Essentially, the domain owner will take less money for the domain name but will be paid in full at the time of the sale and does not have to worry about the buyer making late payments or defaulting. Each deal is different, so it would be impossible for me to provide an actual illustration with real dollar amounts.
There are a few important things Domain Capital would need to consider. Domain Capital would need to be comfortable with the domain as collateral for the amount of money the buyer is paying. The company would also consider the payment structure and length of payment stream. Finally, the company would need to ensure that the the deal assignable to them based on the contract between buyer and seller.
In chatting with Vince and Gregg, they suggested reaching out to them towards the end of a negotiation to gauge their interest in a particular deal if the seller is interested in doing a secondary deal like this. They would also be happy to chat with people who already have deals with payment plans in place. This is a small part of Domain Capital’s suite of services, and the company will consider deals like this on a case by case basis.
My company has agreed to quite a few domain sales that have a payment plan. Knowing that I could cash out at a bit of a discount at the time of the deal seems like a good opportunity, and it’s something I will likely explore when the time comes. I don’t love doing deals with payment plans, but this type of deal may make them more appealing to me.
One issue I see and is a deal breaker all round…
Lets assume I agree to sell a name on a payment plan for X years. Odds are the domain has sold at a price above market value. Otherwise why wouldn’t I just sell it for a full cash payment now at market value?
That means there is virtually no actual market value domain sell that would need a payment plan to sell.
If so the seller is the idiot here because they could get all funds now easily…again IF it was sold for fair market value.
To sum it up, nice idea may work a bit for them but I see no reason it really will.
Maybe because the person willing to pay market value can’t pay that full price now and doesn’t want to finance the purchase.
I get what you’re saying but the idea of market value is not exactly easy to pinpoint.
My guess is they’ll do these deals at 50% ltv of the domain and then they’ll back the figures into a yeild of 18%
We’ve done these deals at Lendvo since our inception, its one of our core domain name finance products. We have some decent flexibility as to this kind of financing to:
1) We can take out the entire seller financing or lease contract in one lump sum, as talked about in the article.
2) The seller can also decide to have Lendvo take out only a smaller percentage, say only 20%, 50%, or 80%. We continue to make modified monthly distributions to the seller/owner for what is left on the contract. This means the customer doesn’t have to sell the ENTIRE cash flow stream if they don’t want to.
3) We can also give a loan against a certain number of payments. This allows the customer to the freedom of choice to “pull forward” only one or a few payments if that is all they need.
Flexibility is key in these deals because everyone has different objectives and that’s what we aim for here.
So, they would be like the JG Wentworth of long-term domain deals.