I Know About Renting Sites Already... Anyone "FINANCING" Websites?

30 replies
Thought I would try something different, it may or may not work, who knows?

I have a client now, that the job was for $6,000 and they were shopping around I guess trying to find a cheaper solution. I mentioned we just started a financing plan for websites.

To be honest, I don't know if it's going to work or not... BUT.. for this specific deal this was the offer...

$1,000 down payment... $500/mo until April of 2013.

So I'm gaining interest and easily made a $6,000 job a $7,000 job for web design.

If they fail to make a payment within 30 days it is "charged off" and sent to a collection agency that I am partnering with that will take I think 30-50%. They report it to the credit bureaus, and all that.

Now... There are advantages to doing this, one is that I don't need to wait for a website to rank. Another is that I still have recurring income even though it isn't permanent. Another is that I milk the project for more than it is worth because of interest! Possibly even more, with a $100 late payment fee as well.

The disadvantages... there is only one, and that is after the terms are up, I don't own the site and I lose the monthly income.

I know it's similar to the rent a site model, but a little different...

What do you guys think? I don't believe I'm going to do this regularly but since doing that on thursday, I signed up 2 more people to do the same thing and it seems to be popular.

Has anyone ever tried this?
#financing #renting #sites #websites
  • Profile picture of the author econnors
    I will offer financing to my clients when I start calling. I will have them pay off the (higher) balance over a year. After that they will have the regular monthly rate....


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  • Profile picture of the author beeswarn
    Yes, I have and it's a good model. You'll want to give them time to cure a 30-day default, but other than that you're okay.

    I haven't used a collection agency, so my comments don't address that aspect.
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  • Profile picture of the author bob ross
    I think it's awesome. I co-own a remodeling business and I sometimes finance smaller jobs for people who can't get approved for financing. My attorney tells me that I can't finance loans for free for some reason, that I have to charge interest in order for it to be a legitimate loan, so I have it amortized and a small agreement made.

    EDIT: I forgot to mention that you definitely should have it amortized too so that way if they don't pay within those first few payments, they pretty much owe you the full amount and barely any of it will go to principal!
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  • Profile picture of the author jacquic
    I've used it for two clients, and they've been happy with the arrangement. In the UK, we can set up something called a 'standing order' - a piece of paper they sign and give to their bank, who then pays the monthly amount to the business in question - and that's worked fine.
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  • Profile picture of the author kenmichaels
    You better check with your attorney.

    In some place its illegal to charge over a certain percentage for interest
    also, i do believe in some area's its illegal period.

    It might just come down to wording, but if i were you i would find out a.s.a.p.

    Remove the interest rate, and its just reoccurring payments, which is 100% legal.
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    • Profile picture of the author iAmNameLess
      Originally Posted by kenmichaels View Post

      You better check with your attorney.

      In some place its illegal to charge over a certain percentage for interest
      also, i do believe in some area's its illegal period.

      It might just come down to wording, but if i were you i would find out a.s.a.p.

      Remove the interest rate, and its just reoccurring payments, which is 100% legal.
      Yeah, I did... It kind of confused me though. He mentioned that there is a state limit but not really a federal limit. I'm limited by what I can do in the state, but not limited federally but since I'm not a federal institution I have to stay within the state limits which I think is 15%.
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      • Profile picture of the author kenmichaels
        Originally Posted by iAmNameLess View Post

        Yeah, I did... It kind of confused me though.
        yeah, they sure know how to do that. I think mine does it to me on purpose sometimes.
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  • Profile picture of the author beeswarn
    Every state has usury laws, but they address consumer lending. We're talking B2B.

    Bob's attorney is right, when you charge interest you have to specify the collateral, who owns it and who can recover it. But you don't have to. You can agree that the property is yours until all payments have been made, as agreed.

    All of this is covered by the Uniform Commercial Code (in the U.S.)

    Nameless, I wouldn't have much confidence in your collections partner if he is no help to you on this. Accepting your receivables sight unseen for 30% might just signify that he's desperate for business or just likes to harrass people for a living.
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  • Profile picture of the author bob ross
    Screw those stupid usury laws. Hook your clients up with a nice loan from westernsky, conveniently located on an indian reservation where the usury laws don't matter!

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  • Profile picture of the author bryson
    Very timely, I was just thinking about doing this over the last couple days.
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  • Profile picture of the author PhilaPM
    I think its an awesome idea. I've been into real estate investing for almost 10 years and owner financing is always very popular. I have also heard of people selling boats and cars on payments as well. I may start offering this to our clients as another way to close leads and generate more monthly income.

    Patrick
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  • Profile picture of the author Creativegirl
    Kudos to you!

    Offering a payment plan or financing has become more popular in the recession. It's what is so attractive to the lost leader web design model (using intuit or homestead to build a site and charge $24-49 mo forever).

    Shocked you could get $1000 interest if I understand your post correctly.

    Establishing with a collection agency is a good idea for all businesses. But do your homework and interview them like anything else. We had to use one for 2 web clients a few years ago. The agency was invaluable beyond their scope. One customer filed a complaint with BBB and BBB was trying to get us into arbitration. Learned that by NOT being a BBB member who cares if someone files a complaint, it's not public.

    At that time the collection agency has a web design client who had to go so far as recording all phone calls because of customers making phone requests then denying it and not paying. That was the situation with one of our clients and why we switched to on online ticket system to put a stop to it.

    Professional services and trades buy sites from niche web and marketing providers and gladly pay $100+ per month for the life of the site without owning it. It's not set up as site rental or leasing but proprietary software, feeds, yada yada yada... Some don't even have real hosting packages but a few services thrown in. It's all about control and the residual income.

    Bottom line, if we're flexible to help customers pay for our services, it's a win-win for everyone, just cover your @ss.
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    • Profile picture of the author ahlexis
      I hate to be someone to throw cold water all over you, but personally I think what you are doing is dangerous.

      And here's why.

      By making it a "loan", you have a lot more to deal with than just usury laws. But also, you have just put yourself into multiple government agencies' jurisdictions. And some of those jurisdictions have some really strange things that they can come after you for. And some of the penalties of those strange things they might come after you for don't just include fines, but a residence at a gray bar hotel . . . called Club Fed.

      The trouble with becoming a banker (by providing financing, that's what you are doing) is that if it ever comes down to having to go to court, you are considered the "expert" in the eyes of the judge. And the business owner you are up against is looked at like "little Grandma from Pasadena" who is up against "the big bad bankers".

      We have all seen it over the last 3 or 4 years, what can happen when a person in a position of power such as a judge or a sheriff thinks a banker is going to get one over on J. Q. Everyman. Suddenly they start "forgetting about" certain laws on the books that you might have been counting on as the basis for your legal position. There was one lady who was about to lose her house, and when the sheriff showed up, he decided right there on the spot that he wasn't going to kick the little ole lady out of her house because of some banker. Even though she'd gotten the loan, signed the paperwork, and then probably hadn't made a payment in years yet most likely spent the money. Was the bank right or wrong? Who knows? Was the sheriff right or wrong? Probably wrong, but his morals wouldn't let him follow the law. My point with this is, you are putting yourself in the position of the big ugly banker with the deep pockets instead of the J. Q. Everyman you SHOULD be considered as, the worker bee who has done work for a man who now no longer wants to pay you yet wants to reap the benefit and reward (unjustly) of your work.

      Now, having said that, you need not just any lawyer but someone who specializes in knowing the laws that the bankers use. And those laws vary wildly from state to state in some cases. Even Microsoft ran afoul of the usury laws in California some years back. And the only thing they did wrong was to use the word "loan" in their paperwork. And their lawyers did not know they'd done anything wrong until many months later, when they realized that, whoops, that piece of paper they'd had all those people sign was perfectly enforceable . . . in all 49 states BUT California.

      Things such as "corporate headquarters" and "jurisdiction" and "terms" all take on a life of their own when you include the word "loan" in your paperwork.

      But don't freak out. There is more than one way to go about it. One way is called factoring. You could charge a bit more, then sell the contract off to a factoring company and receive payment up front and be out of there. The factoring company would then receive the payments and deal with the laws as well. They are experts and know the intricate details of the laws in question intimately, like the back of their hands. And it would be a good thing to meet with the factoring company (or anyone else you might decide to sell the paperwork and right of collection off to) to let them tell you what they need to have inside the contract before you start off. Because what they can pay you (as in how big a percentage you can sell your paper for) hinges on how tight and right your paperwork is.

      And no, I don't own a factoring company, or have anything for sale to help you out.

      I am just trying to let you know that there is a lot more involved in this than "let the collections agency deal with it". And that it can get ugly real fast if you are not careful.

      The guys at the Indian reservation have a unique thing going on. American Indians are exempt from many laws pertaining to usury when doing business with their headquarters inside the reservation. I think it's something they negotiated when they were negotiating about their casino laws and rights.

      I will say this, though. There is a reason why most people who have credit cards in their wallets usually end up sending their payments off to only one or two states every time they make a payment. It's because the bankers shopped for jurisdiction, and then when they found the favorable exemptions they were looking for, almost all of them relocated their payment servicing divisions to those one or two states that gave them the edge. But it can sometimes cost a whole lot of money to shop for jurisdiction if you want to get it right.

      You personally may never have a problem blow up in your face like what I mentioned above. But then again, I think the risk is not justified by the reward in this case. Not saying your services are not worth every penny you might receive; on the contrary. I personally think you would be better off to seek a higher payment for your services than to consider wading in to the financing arena unprepared. Because like you said, it sucks when the finance term is up and you have the incoming payment drop.

      So why even go there?
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      • Profile picture of the author iAmNameLess
        Originally Posted by ahlexis View Post

        I hate to be someone to throw cold water all over you, but personally I think what you are doing is dangerous.

        And here's why.

        By making it a "loan", you have a lot more to deal with than just usury laws. But also, you have just put yourself into multiple government agencies' jurisdictions. And some of those jurisdictions have some really strange things that they can come after you for. And some of the penalties of those strange things they might come after you for don't just include fines, but a residence at a gray bar hotel . . . called Club Fed.

        The trouble with becoming a banker (by providing financing, that's what you are doing) is that if it ever comes down to having to go to court, you are considered the "expert" in the eyes of the judge. And the business owner you are up against is looked at like "little Grandma from Pasadena" who is up against "the big bad bankers".

        We have all seen it over the last 3 or 4 years, what can happen when a person in a position of power such as a judge or a sheriff thinks a banker is going to get one over on J. Q. Everyman. Suddenly they start "forgetting about" certain laws on the books that you might have been counting on as the basis for your legal position. There was one lady who was about to lose her house, and when the sheriff showed up, he decided right there on the spot that he wasn't going to kick the little ole lady out of her house because of some banker. Even though she'd gotten the loan, signed the paperwork, and then probably hadn't made a payment in years yet most likely spent the money. Was the bank right or wrong? Who knows? Was the sheriff right or wrong? Probably wrong, but his morals wouldn't let him follow the law. My point with this is, you are putting yourself in the position of the big ugly banker with the deep pockets instead of the J. Q. Everyman you SHOULD be considered as, the worker bee who has done work for a man who now no longer wants to pay you yet wants to reap the benefit and reward (unjustly) of your work.

        Now, having said that, you need not just any lawyer but someone who specializes in knowing the laws that the bankers use. And those laws vary wildly from state to state in some cases. Even Microsoft ran afoul of the usury laws in California some years back. And the only thing they did wrong was to use the word "loan" in their paperwork. And their lawyers did not know they'd done anything wrong until many months later, when they realized that, whoops, that piece of paper they'd had all those people sign was perfectly enforceable . . . in all 49 states BUT California.

        Things such as "corporate headquarters" and "jurisdiction" and "terms" all take on a life of their own when you include the word "loan" in your paperwork.

        But don't freak out. There is more than one way to go about it. One way is called factoring. You could charge a bit more, then sell the contract off to a factoring company and receive payment up front and be out of there. The factoring company would then receive the payments and deal with the laws as well. They are experts and know the intricate details of the laws in question intimately, like the back of their hands. And it would be a good thing to meet with the factoring company (or anyone else you might decide to sell the paperwork and right of collection off to) to let them tell you what they need to have inside the contract before you start off. Because what they can pay you (as in how big a percentage you can sell your paper for) hinges on how tight and right your paperwork is.

        And no, I don't own a factoring company, or have anything for sale to help you out.

        I am just trying to let you know that there is a lot more involved in this than "let the collections agency deal with it". And that it can get ugly real fast if you are not careful.

        The guys at the Indian reservation have a unique thing going on. American Indians are exempt from many laws pertaining to usury when doing business with their headquarters inside the reservation. I think it's something they negotiated when they were negotiating about their casino laws and rights.

        I will say this, though. There is a reason why most people who have credit cards in their wallets usually end up sending their payments off to only one or two states every time they make a payment. It's because the bankers shopped for jurisdiction, and then when they found the favorable exemptions they were looking for, almost all of them relocated their payment servicing divisions to those one or two states that gave them the edge. But it can sometimes cost a whole lot of money to shop for jurisdiction if you want to get it right.

        You personally may never have a problem blow up in your face like what I mentioned above. But then again, I think the risk is not justified by the reward in this case. Not saying your services are not worth every penny you might receive; on the contrary. I personally think you would be better off to seek a higher payment for your services than to consider wading in to the financing arena unprepared. Because like you said, it sucks when the finance term is up and you have the incoming payment drop.

        So why even go there?
        Thank you for your essay... But I never mentioned the word loan, once. I said lease, or finance. In the contract it states it as a lease, but thank you, I might need to take a closer look at the wording.

        I don't know if I'll offer it to everybody, just thinking about it... just 3 clients are going to make me around 21,000 through this.

        I just don't understand your response... It's just as if you lease a computer from rent a center you end up spending 300% more than the actual value and if you don't make your payments it gets repossessed and reported on your credit, sent off to collections..

        I understand different laws.. my entire family consists of attorney's of different specialties so I think I'll be okay here.. except for my step dad who owns a courier, and home remodeling company. But really, a lot of what you said doesn't apply here in my opinion. We aren't talking about loans, we aren't talking about suing anyone, or going to court.. I don't see how I would be seen as the big bad wolf for charging for a service of mine.

        For me.. there is no risk... The reason there is no risk for me is because the down payment, pays for the service, I'm already profiting at the point I receive the down payment. Every other payment is pure profit, and for no work.

        Anyway.. it's just a thought at the moment. I have a friend who is a very popular investor and he loves the idea. Of course, if this were something I'd pursue, I'd set up a different corporation for it.
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        • Profile picture of the author sandalwood
          iamnameless,

          In your last response you said:

          "Thank you for your essay... But I never mentioned the word loan, once. I said lease, or finance. In the contract it states it as a lease, but thank you, I might need to take a closer look at the wording."

          If you check out the legal definitions of both lease and finance you will see they are considered loans. Also, it isn't what you call it in your paperwork, it is what the court says it is. Believe me, cuz I been there done that on another issue. His honor said words to the effect, yep, that's what you call it but this is what we call it.

          Don't know if that helps but that's the truth. Also, perusing a law dictionary wouldn't be a bad idea. Funny how words have a different meaning under the law than they do when you and I are using them.

          Tom
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          • Profile picture of the author iAmNameLess
            Originally Posted by sandalwood View Post

            iamnameless,

            In your last response you said:

            "Thank you for your essay... But I never mentioned the word loan, once. I said lease, or finance. In the contract it states it as a lease, but thank you, I might need to take a closer look at the wording."

            If you check out the legal definitions of both lease and finance you will see they are considered loans. Also, it isn't what you call it in your paperwork, it is what the court says it is. Believe me, cuz I been there done that on another issue. His honor said words to the effect, yep, that's what you call it but this is what we call it.

            Don't know if that helps but that's the truth. Also, perusing a law dictionary wouldn't be a bad idea. Funny how words have a different meaning under the law than they do when you and I are using them.

            Tom
            Thanks...

            Maybe I will think twice about this.. might as well stick with the all up front thing.. I just liked the idea of more monthly income and slightly higher sales.
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  • Profile picture of the author beeswarn
    Hehe. I feel for your pain. Maybe stick with asking "has anyone ever tried this," and don't ever post "what do you guys think."
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  • Profile picture of the author agonce
    Check this out:
    https://www.billmelaterbusiness.com/index.xhtml

    You might have seen the bill me later program on paypal. They have it for businesses as well, who want to promote now, pay later
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  • Profile picture of the author iAmNameLess
    Originally Posted by Nathan Robinson View Post

    Also if you dont mind me asking, 6,000 for a site? Thats awesome! What exactly kind of site is it? Just for a business?
    Ecommerce site with about 100 products or so. The reason I did it like this for this person, is because they are getting funded. They'll have a small fortune to play with in fall, but I want to get the money coming in now, and have that relationship built for the BIG stuff.

    I would say.. the average sale I have is $1,000.. I'm trying to get that up a little bit. My goal by July is to have my average transaction be at $1,300-1,500.
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  • Profile picture of the author Aussieguy
    FYI, just ideas here, not experience.

    I realise this isn't financing, but rather a payment plan, but anyway...a while back I was thinking, you've gotta charge monthly/yearly or whatever for site management, why not just charge monthly for a site. I was on a web designer's site recently that does just that - it was like $99 a month and you got a website plus hosting/email/domain/ - all the usual, plus directory listings & content. Not a bad solution for some businesses.

    I've thought: since they've gotta pay (what could be perceived by them to be) 'dead money' each month or year anyway, and combine that with sites needing updating after what? 4 years? More? Less? I thought, why not bundle the whole thing up? Get's a residual thing going. Build in x dollars for a site, y dollars for site revamp in (say) 3 years....and 36 months site management. If someone normally charges $30 a month for a small business site management and $800 for a small business website, you could build in a website, site management - and, provided they stay with you - in 3 years time you will do a site re-vamp to keep it up with times, and you could offer that for only $75 a month. Maybe $750 for annual payment method. That site refurb every 3 years helps keep them your customers, which makes the whole thing a lot more residual flavoured. $99 a month would be closer to the $1,242 per site, which is about where you want your average sale to be. Plus, they've paid for their 2nd site (and any future sites) in advance. After that point you could actually drop their price because over the next 3 years they only need to "pay" for one site. Or, you could not drop the price to account for inflation over that period. It's a model I like (on paper) and not everyone necessarily would, because anyone with <12 months becomes a risk. I wouldn't make it "no obligation" though, I'd make it a contract where they are liable for 12 months worth of payments or whatever.

    Anyway, sorry if that's too far off your original topic!

    For finance, I'd set up with a finance company!
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  • Profile picture of the author Aussieguy
    Like many newbies, I used to think, "who would buy a $2k site?". Through exposure to what some businesses charge, you get your eyes opened.
    I was talking to a web designer from Sydney on the weekend who, for quality, custom sites these days rarely charges <5k.

    Originally Posted by Nathan Robinson View Post

    Also if you dont mind me asking, 6,000 for a site? Thats awesome! What exactly kind of site is it? Just for a business?
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  • Profile picture of the author payoman
    Dammit nameless how do you get these massive numbers? Can you mentor me?
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  • Profile picture of the author Hugh
    @iAmNameLess,

    "Rent To Own"

    Hugh

    PS Love those monthlies.
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