The Types of Financing Your Wireless Business Needs to Grow
Small and mid-sized wireless providers face a new challenge. The current coronavirus, COVID-19, a pandemic that is sweeping the world, has shown businesses and educators that there is another way to conduct business and school—online at home! As schools are scrambling to meet the needs of students that lack internet access, employees are desperate to find a reliable wireless provider that meets their needs. Rural communities and communities with a lack of options are finding the transition into a more digital world difficult and frustrating.
Wireless provider companies have an excellent opportunity to rise to the occasion by expanding their networks and subscriber areas into new communities and increasing their Wi-Fi capabilities with faster download and upload speeds, more bandwidth, and better reliability. The problem that these wireless providers face is the ability to pay for all the upgrades and expansion. Without an upfront increase in subscribers, how can a company gain capital for growth?
There are four types of telecommunication companies that are addressing internet needs. Broadband internet is the method of delivery used by these companies and is the industry standard for high-quality, reliable internet. Cable, WISPs, FISPs, and Hybrid companies will each have different financing needs and methods for obtaining that financing. We’ll break it all down for you below so you can decide which methods apply to your internet company.
Cable Telecommunications Companies Financing
Cable operators should be looking to the future and how they can implement new wireless solutions to their traditionally wired models. Many wired providers are focusing their 2020 expansion efforts on becoming a hybrid solution that can offer both wired and wireless internet options for residential and commercial customers.
One of the ways cable operators are entering the hybrid space is by expanding their infrastructure to get more cable fiber laid throughout communities. Expanding your infrastructure is a costly expenditure, and many small to medium-sized cable operators don’t have the capital to expand without the customers already locked in. Luckily, banks are beginning to understand the financing needs of internet providers. However, there is still a long way to go in trying to reconcile asset-backed collateral with the projections of financial growth and the ability to repay when the monthly cash flow may not be reflected yet.
WISPs Challenges in Finding Financing
Wireless internet services also provide broadband internet access and are one of the fastest-growing, albeit newest, forms of internet provider services. The return on investment for WISP company owners is much higher than the other competitor companies. WISP companies are generally aimed at increasing their subscriber base through expanding their infrastructure.
WISPs need financing to expand their infrastructure throughout neighborhoods by adding fiber to connect more broadband pipes to towers. In-home technology also needs to be top-of-the-line and high quality if WISP companies want to be competitive. More towers and antennas are needed and are some of the most expensive technology to build and operate.
WISPs have one of the most challenging times obtaining financing through traditional banks because of the lack of collateral these businesses have. Many bankers do not want to take the risk in lending to WISPs based on growing subscriber bases that could fluctuate at any time.
Fiber Internet Services Providers are very similar to WISPs because they use fiber to transfer the internet. Fiber is the most reliable and considered the optimal way to deliver internet access. Most WISPs that use fiber are often considered to be hybrid because they can offer wired connections through fiber as well. FISPs and Cable operators are the most trusted internet service providers currently on the market and generally have much better success in obtaining traditional financing.
Hybrid Internet Service Providers
One of the ways that internet providers are finding is the fastest, easiest, and most profitable way to expand and grow is to become a hybrid internet service provider. As cable operators begin to offer wireless solutions and WISPs begin to expand by laying more fiber and broadband pipes, these companies become hybrids.
Fiber is costly to deploy because of how labor-intensive the process is concerning wireless solutions that rely on tower signals and in-home equipment. Because fiber is the most reliable, internet providers need to begin using fiber in their operations. Many hybrid companies use fiber in their towers, however, and don’t always run fiber straight into consumer homes.
5G and Wireless Expansion
One thing that all internet service providers need to invest in is the 5G technology the world is seeing spearheaded by the United States. This new technology is expected to be the leading mobile network technology by 2025, and home internet companies need to get on board as 5G changes the landscape of wireless access.
Financing Solutions for WISPs, FISPs & Other ISPs
When banks fail to understand the financing needs of WISPs and other service providers, these companies may also face a stall in their expansion and growth efforts. One way to get the financing these providers need is to go through capital investment funding. These sources of funding are great for small and medium businesses, entrepreneurs, and operators that need financing for equipment, software, IT equipment, commercial trucks and trailers, and more.
Working capital loans are also an excellent solution for small and medium telecommunication companies that need extra cash flow for things such as payroll and business expenses. Repayment terms are often flexible, including monthly, weekly, or even daily payment options with low-interest rates and easy to understand terms.
Private funding groups often look at more than just collateral when they are determining the loan you qualify for and focus on annual revenue and bank statements showing the cash flow of the business. Working capital loans through private funding companies will also be different than the loans offered for equipment or software financing specifically.
When companies need specific financing for ventures such as new equipment and material to expand their infrastructure, the terms and conditions can be different than a loan that is for any business expense. Some of the differences can include interest rate and term length.
If you’re more interested in learning about financing for your internet company, contact Dimension Funding to get started on your approval process.
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