Most lenders in the United States have a clear understanding of the business model of traditional businesses such as retail stores, manufacturers, tire stores, etc. These same lenders would be able to quickly determine if your small business qualified for a loan or line of credit.
The telecommunications industry is complex and unique, and traditional lenders usually do not have the expertise in working with independent telecoms. Financing options are much more difficult to find for small telecom businesses. It is of no interest to a traditional banker to offer a loan or line of credit to a telecommunications business with small receivables.
Another drawback is the usual timeline of telecom receivables – 45 or more days to collect after delivery of services. The billing operations of the telecom industry as a whole are a very real concern for traditional lenders, who often do not have a full understanding of the billing structure. Banks typically don’t provide credit facilities for industries or companies they don’t understand.
Instead of a traditional bank credit facility, a credit provider that specializes in telecom finance can tailor a finance program specific to your telecom operations.
Telecom factoring allows independent telcos and CLECs to sell their unpaid invoices to another company. A telecom factoring company advances a percentage of the customer’s invoice upon billing, thus benefitting the telecom in not having to wait for payment from the customer. Typically it is this payment delay that is an obstacle for small telecommunications businesses paying bills, making timely investments or expanding their business.
Receivables factoring can benefit your small business by:
1 – Providing working capital
2 – Providing a flexible funding program that increases as you increase your sales
3 – Allowing you to take advantage of vendor discounts
4 – Freeing funds for payroll and taxes
5 – Allowing you to extend credit for large orders
6 – Providing cash to buy equipment or inventory as needed
For your telecom, finance options may include: factoring, asset based solutions and investment capital.
1) Factoring is structured to allow your telecom company to obtain money more quickly against your receivables. This is a great option if you consider a specialized telecommunications financing company for your finance needs.
2) Asset based solutions use existing receivables, equipment, inventory and contracts as collateral for your funding. This can be a good option if you are an established operation with considerable assets, but for a smaller independent, this may not be an appropriate option.
3) Investment capital can be a great option if your business is open to the idea of the investor specifying funding to be spent on specific items rather than day-to-day operating expenses. This is also commonly called “venture capital”.
When it is time for you to explore financing options, a specialized, experienced industry financing company is a great help with its clear understanding of telecom operations, receivables and billing structure.
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