Small businesses unable to get a loan from a bank may have a new option at their disposal in the not-to-distant future, putting up their domain name as collateral. While a domain name as collateral is not completely unheard of, a fast scaleable solution has yet to come to market because of how slow and clunky domain name registrars are.
But with new blockchain technologies on the rise the ability to transfer ownership of a domain name like it was just any other NFT offers the potential to leverage an entire new asset class. Across the US, there are millions of businesses unable to obtain financing at all or beyond what is currently available to them. Being able to put one’s domain on the line (which is perhaps where their sales traffic comes from), stands to present lenders with an especially attractive form of protection against a default. Procedurally, the domain name would go into escrow while still functioning as normal. If the loan is repaid, it moves back to the borrower. If the loan defaults, a smart contract moves the domain from escrow to the lender. This ability to liquidate the collateral without procedural hangups is a game changer and also allows the lender to easily sell off the domain or commandeer the business’s web traffic to go wherever they want.
If it sounds farfetched, just imagine a scenario where a business is presented with these two options.
Option 1: $0 in financing because their credit was bad and they have no hard assets.
Option 2: $100,000 in financing and they just have to authorize the transfer of their domain to the escrow contract.
Experience tells me that a significant percentage of businesses will choose option 2.