Funding options have traditionally been a real barrier for small telecommunications companies. Major financing companies simply do not understand the telecom model of business, and this makes them less likely to lend to them.
Small telecommunications businesses face many hurdles in trying to compete in the marketplace with the big telecom giants. While your small telecom company can offer your local customers better and more personalized services than the big telecom companies can, there are many barriers to getting your message out there and growing your market share. Just as the old adage about getting a job without experience goes, it is hard to grow your business when you need all of your working capital just to run your business day to day. While the telecom giants can call up their banker and get a loan, it isn't as easy for your small business to do.
For hundreds of years companies have been utilizing the value of their assets as collateral for borrowing money. Your distant relative who owned a small grocery store may have used his inventory and property value as collateral for borrowing money to add onto his building or replace his antiquated refrigerators. As a small telecommunications business you may want to take a similar action in order to grow your business and service offerings.
As you may have experienced, most of the major financing companies out there just plain do not understand how telecommunications businesses work. Unless you are AT&T, or another large telecommunications company, with a monthly billings total of over 5 million dollars, most typical business finance resources are not that interested in talking to you. It isn't that they are not interested in your business and its success; they just simply do not understand how telecom billings work.
As a small business owner, a potential lender may ask you to make a personal guarantee or sign a recourse agreement in order to obtain funding. This can be a scary proposition and place you personally at a risk level you may not be comfortable with. If you come to this point with a lender then it is time to move on and look for a better alternative.
One alternative available in telecom financing is factoring. Factoring is the process whereby your company can borrow money against its receivables. Traditional factor rates however can be high, because lenders balk at the way telecommunication company's bill, and the relatively small amounts of each individual billing. If you are able to locate a lender who will give you a discount, because they understand the uniqueness of telecom financing, factoring can be a good option to explore.
Another alternative you might consider for your telecom funding needs is an asset based solution. By securing your funding with your contracts, equipment or other assets, you can borrow against them and use the additional capital to expand your business. Asset based solutions can be a bit easier to find, and cheaper than trying to do a receivables factor.
A third alternative to explore is the idea of an investment capital cash infusion. If you are open to using investment capital this can be a wonderful way to grow your business.
While telecom funding can be hard to find, there are options open to small telecom businesses. By considering all of your options and selecting the one which fits your business the best, you can be well on your way to growing and expanding your business.
** About the author: Thermo Credit LLC provides asset based solutions and works with partner companies to offer loans, lines of credit, and capital investment. We are rich in telecom funding experience. We can offer insight beyond strictly business financing resources. Learn more at http://www.thermocredit.com.
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