If your small business were a grocery store or automotive mechanic shop, most every lender in the U.S. would immediately understand your business model. If you were to approach them looking for a line of credit, they would be able to quickly determine if your business qualified for one. However, as the owner of a telecommunications company you know that this is not always the case for your industry. Traditional lenders simply do not understand how telecom companies operate and the intricacies of telecommunications funding.
If you are a large multi-national telecom company, funding sources abound for you simply because of the huge amount of revenue your business generates month after month. However, if you are a small telecom business, obtaining that line of credit can be much more difficult. When you approach a traditional lender for funding, you will likely find that they do not understand your business model and telecommunications financing in general. It is not in the traditional banker's interest to work with telecommunications businesses with receivables that are all small amounts. Generally, your receivables take 45 or more days to collect after delivery of services. Because these billing issues are unique to the telecom industry, traditional lenders do not fully comprehend the fine details and tend to choose to deal with businesses in more traditional roles.
Once your small telecommunications business is on solid ground, and you are looking to expand your market base, there are three options available to you for financing: factoring, asset based solutions, and investment capital. Let's take a quick look at each of these options:
Factoring: Factoring is a financing process which allows your company to obtain money against its receivables. This can be much easier to obtain if you can find a specialized financing company with telecommunications experience.
Asset Based Solutions: Asset based funding solutions involve using your existing contracts, equipment, and other assets as the collateral for your funding. This can be a good option to consider if you have a lot of assets or large contracts to leverage. However, if you own a small local telecom company, your company may not have the assets or contracts to make this form of funding feasible.
Investment Capital: If your business is open to the idea of investment capital versus a traditional line of credit, investment capital can be a win-win situation for everyone.
While finding small business financing can be challenging in the telecommunications industry, it is not impossible. When it is time for your telecom company to expand you should consider factoring, asset based solutions, and investment capital as possible options. Whatever you may choose, your decision must fit within your long term business plans.
