Domain Name Wire

Domain Name Wire

  • No Credit Crisis for Domain Names

    1. BY - Feb 14, 2008
    2. Domain Services
    3. 9 Comments

    Domain financing is still strong despite credit crisis.

    With all the attention on the credit crisis and subprime mortgages these days, I was curious if domain financing companies might be tightening standards and raising interest rates. I reached out to the authority on domain financing — Domain Capital president Robert Alfano — to find out if the domain financing business is changing.

    Domain Name Wire: Is it more difficult for borrowers to obtain financing from Domain Capital given the current mortgage crisis?

    Alfano: No. The current mortgage crisis has had no impact whatsoever on our borrowers receiving financing from us. While there are many aspects of the domain industry that are often compared to the traditional real estate industry and although our services are sometimes perceived to fill the void of mortgage lenders, Domain Capital is simply a leasing company that was formed and built on decades of experience in the technology leasing business. Also, we are uniquely and strategically positioned as a privately funded specialty finance company. As a result of being a privately funded leasing company, as opposed to having a traditional mortgage-based business model, we have seen no reason to tighten our financing guidelines even with what is currently happening to the traditional real estate market.

    DNW: Is Domain Capital able to get the same access to financing as it did before the mortgage crisis?

    Alfano: Yes. Over the past two years, we have been extremely successful in building our portfolio to levels that have well exceeded our initial business model projections. As a result, our cash flow and private funding sources allow us to operate our daily business.

    DNW: Has Domain Capital changed its interest rates on domain financing?

    Alfano: No. We have seen no need to adjust the interest rate that we charge at this time. Our cost of money has remained stagnant and our interest rate is well situated. We are able to keep our interest rate at the same level due to the expensive nature of alternative sources of funding. Also, traditional financing sources are typically more expensive, do not recognize domain names as assets and collateralize different types of assets such as personal real estate, stocks, bonds, etc.

    DNW: What standards/guidelines does Domain Capital have for its borrowers and have the standards/guidelines become stricter given the current credit market?

    Alfano Again, our funding guidelines and procedures build on decades of experience in the technology leasing business. We are the definition of a relationship-based business and pride ourselves on that fact. Our financing guidelines have complied with banking industry standards for over thirty years. As a result, we see no need to change our financing guidelines despite the current credit market. Specifically, our financing guidelines are a hybrid of assessing the quality of the underlying asset (the domain name) and the credit worthiness of our clients. With respect to the quality of the underlying asset, the due diligence process was specifically designed to determine, among other things, whether a prior security interest in the domain name exists and whether there any trademark concerns with the domain name which could cause an ownership dispute under the Anti-Cyber Squatting Consumer Protection Act. Concerning the borrower’s credit, we look for a solid credit score and a credit history that contains limited credit blemishes. Credit issues such as bankruptcies or tax liens require that we conduct additional due diligence.

    DNW: How much money does Domain Capital finance on a domain purchase?

    Alfano: There is no set amount of money that we use to determine the amount of financing on a domain name transaction. Rather, each deal is different depending upon the quality of the underlying asset(s) and the borrower’s credit.

    Alfano: From where we stand, we have seen and continue to see numerous inquiries a day for our financing services. Domain investors are realizing the many business benefits of taking their domain names and using them as a means to generate working capital. Our services, combined with the explosion of online and live auctions, have significantly contributed to the overall growth and increased market capitalization of the entire industry. As far as the future is concerned, we anticipate seeing a record number of new entrants into the domain investing space, higher than ever domain sale prices and even more online and live auctions.

9 Comments
  • Interesting post there.

    The value of a domain name is determined by the seller and how many buyers want the domain name (how much money does the seller wants and what is the demand for that domain name).

    The Financing $ amount of the domain name is also determined by what the credit history of the person is which needs the finance, what assets the person has, is it a secured loan where the person uses it’s assets as a collateral to finance the domain name, what the Interest rate is on the $ amount which is financed and how long the loan is (weeks years or more).

  • What a breath of fresh air in the current gloomy articles appearing for the Domain Industry in 2008. Kudos to Andrew Allemann and Domain Capital’s Robert Alfano for this piece.

    I believe there will be some other “soon-to-be-announced” exciting news for domainers.

    Stephen Douglas
    Successful Domain Management™
    BLOG: http://www.Successclick.com
    DomainRelevance.com
    “Own Your Competition™”

  • I feel Alfano doesnt reveals himself frank. He doesnt says what is the % of interest. How much he offers for a domain (or) domain portfolio. How he analyze / appraise a domain and what is the maximum percentage of the asset value he offer as loan. What is the length of repayment. Does he offer any payment holiday ETC. His business will develop much more if answers this. His Website doesnt have a F.A.Q. So that it is very useful for everybody.

    None of my questions were answer in this interview.
    Best Regards.

  • Having talked to Domain Capital in the past, I’ve found that the rate will be passed on the value of your name and your personal credit history. All terms are negotiable and can either be accepted or refused.

    Scott Neuman
    President – Recordweb Communications LLC
    http://www.recordweb.com

  • In the last few weeks, I’ve noticed a big dropoff in mid and lower level domainers purchasing domains. I’ve dropped prices on domains I know to be premium domains, which I always appraise at wholesale. Even below wholesale, I’m not getting any nibbles, other than “under $100″ bids.

    Anyone who can tell be that “boast.org” isn’t worth at least $300 is not experienced in domain appraisal. However, a domain is always only worth what somebody will pay. Since that domain doesn’t seem to have a BUSINESS SECTOR buyer, it has to be appraised for a domainer or other speculator intending to build the domain out for their ideas of content.

    I am offering this domain on several domain forums, and I’m getting bids, in the high $xx. Revealing this information will diminish my chances of making the deserved price this domain commands, but I’m using it as a point of reference to show that single word domains, even in .org, are not drawing expected prices. This is a one word, very descriptive and attitudinal dictionary domain of only five letters, will probably sell for less than $500. Six months ago, I turned an offer of $700 down.

    So my point is, the GW BUSH Recession is, in fact, affecting the domain industry because it’s preventing lower level domainers from having enough cash to pay a little more for domains they want. Additionally, even the big guys are avoiding buying domain portfolios, and focusing more on SELLING.

    Anyone want to deny my claim? Domain sales have taken a big drop.

    Stephen Douglas
    Successful Domain Management™
    BLOG: http://www.Successclick.com
    DomainRelevance.com
    “Own Your Competition™”

  • Brian Bisset says:

    May 19, 2008 at 6:59 am

    I think it would be beneficial to all domainers if there was a repository of articles and/or information that supported the relevance and importance of what a good name can do for one’s business.
    We all have read Bill Gates comments on the ultimate real estate, but have not come across too many pieces that argue this well.
    If anyone knows of any, please list them or contact me: b.d.bisset@gmail.com

    I honestly feel that the more the general public understands the importance of relevant domain names, the better off we’d be.

    TIA, Brian Bisset

  • *Brian Bisset’s comment:

    I’ve been trying to push for this for three years. The more the public and business sector understand our industry, the more sales to end users will occur. Period. We need to organize this type of marketing promotion. How? Well those who have the big money and the big portfolios will probably define that for us this summer.

  • Hi

    Domain Capital is unique, and even extends it’s services to the right names in the .co.uk sphere. We have just invested in and developed http://memory.co.uk and are now looking for domains with Domain Capital’s backing in mind.

    Domains are still incredibly undervalued – especially .co.uk.

    For example a personalised numberplate here with for example “mds 1″ would cost 150,000$ on the open market and jet MDS.co.uk could probably be picked up for just 10,000$ – go figure whether there is upside potential there!!

    Bes Hardyment
    MD: http://explosivemedia.com

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