Tom,
The points you make seem to drive home the point that some leasing
companies and other consultants try to make. Keep your cash on hand for
operational expenses and use leasing to purchase the equipment. This
preserves your capital even though it may cost more in interest. Using that
logic it would seem that the lease would allow you to purchase the equipment
and start producing cash flow. You could show the SBA or RUS this cash flow
in addition to having your capital still in the bank as collateral. Cash as
collateral is easier for a lender to understand than some sort of technology
that could be obsolete in 6 months. This is not the solution for everyone
and if you can't get a lease it obviously doesn't work.
Business owners should consider this about debt and the deflation
possibility, when you have paid cash for your equipment and they deflate the
dollar, your equipment investment just deflated as well. The only thing it
can give you then is cash flow (as long as you have it installed and a
paying customer on the equipment). If however you bought all of that
equipment using credit and they deflate the dollar you have actually hedged
against the deflation because your cash did not get deflated, yet you are
still producing revenue on the other people's money you used. If you can get
good credit terms and can make the numbers work I would personally borrow
like crazy and expand to ramp up cash flow. The numbers will work if the
government doesn't cause deflation, but if they do it works out even better.
People who have loans always make out better in deflationary times over
people who have hard cash assets. If you don't have assets they don't lose
value. The person who built their business on cash or personal assets loses
out twice. First the value of everything they already paid for depreciated
in a big way and then the cash flow they are producing is buying less
because of inflation. Hope that makes sense......
Thank You,
Brian Webster
-----Original Message-----
From: wireless-boun...@wispa.org [mailto:wireless-boun...@wispa.org]on
Behalf Of Tom DeReggi
Sent: Saturday, January 03, 2009 3:23 PM
To: WISPA General List
Subject: Re: [WISPA] Congress may help smaller ISPs grow
Chuck, I will contact you offlist. I have some question.
I have not tried SBA recently, and its time that I probably should, before I
critisize the program.
My point was... In past experience.... SBA enabled guaranteeing very low
rates, but SBA could sometimes be harder to get than traditional loans, as
SBA required more documentation. Very few SBA loans get defaulted on,
because they have such strong requirements. I found the same thing with RUS
loans. The misconception by many is that SBA gives loans, which is not the
case. SBA guarantees other bank loans. So those banks are giving loans at
lower interest than they normally do, because of the SBA's guarantee. But
the SBA still wants to cover themselves similar to any other lender. It does
not get the borrower off the hook for proving credit worthiness, by
traditional industry methods. What I always found Ironic was that to get the
SBA loan, one had to prove they were turned down by other lenders. But then
the SBA potentially would turn down applicants for the same reasons.
All loans have the same requirement, proving 1) ability to pay back
(pre-existing consistent cashflow and profit from revenue stream), 2) proven
credit worthiness, 3) colateral.
Getting a lower interest, just makes the lenders look more closely to prove
the above.
There are very few lenders that will lend based on a potential of a
"business plan" (that does not have pre-existing good cash flow to back it
up), or simply based on the merit of the business. I find that borrowers
that don't have problems getting loans are borrowers who have had a past
life that had already established their high credit worthiness, usually via
personal assets, or by having multiple officers to guarantee the loans.
The big problem that I ran into was... I sold most of my traditional assets
to fund my network build outs. And then invested all profit back into the
business to build out the network, there fore increasing potential. And then
Banks did not look at those network assets with a value, the same as they
would if it was still real estate, so to speak, that was recognized as a
safe liquitable asset.
I have found that obtaining finance requires long term planning and
preperation, to position oneself to look good to financers by their
standards. I have found that being more or less debt free, and owning a
network, had no value to the lenders that I have talked to.
Even with RUS matching fund loans, it seemed similar. They were more
interested in what new money I'd put in, for them to match, and did not
value the money already put in and spent..
My company is growing, and my financials are improving to be loan worthy, so
I won't have a finance problem to much longer. But it was a long road, and I
do not wish the same experience to other new start ups, and small providers
that grow to the same point.
Tom DeReggi
RapidDSL & Wireless, Inc
IntAirNet- Fixed Wireless Broadband
----- Original Message -----
From: "Chuck Bartosch" <ch...@clarityconnect.com>
To: "WISPA General List" <wireless@wispa.org>
Sent: Saturday, January 03, 2009 1:25 AM
Subject: Re: [WISPA] Congress may help smaller ISPs grow
>
> On Jan 2, 2009, at 12:13 PM, Tom DeReggi wrote:
>
>> What I'd like to see is a SBA Broadband Lease guarantee program,
>> that is easier to qualify for than traditional SBA guarantees, to
>> help open up lending to the WISP market. There is tons of money out
>> their, But its harder than said for most to prove themselves "credit
>> worthy".
>
> I haven't seen access to money to be that much of a problem. I'm a
> relatively small operator (compared to Travis, for example), but I got
> a $285K SBA loan last year with no trouble at all. Took just a few
> weeks. The rates weren't bad at the time (8.25%), but they are lower
> now I think. Have you actually *tried* the regular SBA route? In our
> case it was authorized both for "pop" build out as well as inventory
> (and a small percentage could even be used for working capital if we
> wanted) and it sure didn't seem hard to qualify for.
>
> Chuck
>
>
>>
>>
>> I'm seeing high risk lenders being more open to 1 yr leases. But
>> lenders are still concerned about 3yr leases, when they realize 3
>> yrs is a long time, and plenty of time for a WISP to loose their
>> custoemrs to Comcast or FIOS. Expecially when grant programs are
>> talked about that might subsidize Fiber Optic deployment growth.
>>
>> Tom DeReggi
>> RapidDSL & Wireless, Inc
>> IntAirNet- Fixed Wireless Broadband
>>
>>
>> ----- Original Message -----
>> From: Travis Johnson
>> To: WISPA General List
>> Sent: Thursday, January 01, 2009 11:47 PM
>> Subject: Re: [WISPA] Congress may help smaller ISPs grow
>>
>>
>> We have been charging the same for internet service for almost 5
>> years.... and just two days ago, we got double the new sign-ups on a
>> single day of what we can do for installs. Business is booming in
>> our area and our industry. Just looking at our 2008 financials, our
>> gross revenues are up 15.2% and our Net Profit is up 10.3%.
>>
>> And I'll take the bet on being able to lease or finance equipment
>> in 6 months. How much shall we throw on the table? I have lease
>> companies calling me daily wanting to give me money... seriously...
>> I get 3-4 calls PER WEEK from all different leasing companies. They
>> all have money and want "credit worthy" companies to use it, because
>> that's how they make money.
>>
>> So again, how much shall we bet on this? :)
>>
>> Travis
>> Microserv
>>
>> rea...@muddyfrogwater.us wrote:
>> ++++++++++++++++++++++++++++++++
>> <insert witty tagline here>
>>
>> ----- Original Message -----
>> From: "Travis Johnson" <t...@ida.net>
>> To: "WISPA General List" <wireless@wispa.org>
>> Sent: Thursday, January 01, 2009 7:24 PM
>> Subject: Re: [WISPA] Congress may help smaller ISPs grow
>>
>>
>> You can not grow in large scales without financing... and I don't
>> understand why people are against it. Our last equipment lease was
>> under
>> 10% interest, no personal guarantees, no money up front. We were
>> able to
>> purchase a large quantity of CPE units (thus saving us about 20% off
>> the
>> single unit price). So, in the end, it actually saves money and the
>> "cost"
>> of installing a new customer is $0 to you, because the $99
>> installation
>> fee pays for the time, materials, etc.
>>
>> Example:
>> single CPE = $190 each
>> 460 CPE = $155 each
>>
>> 36 month lease on $71,300 = $2,300 per month x 36 months = $82,800 /
>> 460
>> units = $180 each
>>
>> But in 36 months, you might be able to charge no more than 10
>> dollars /
>> month per customer. That's the magic of deflation - which is already
>> occurring.
>>
>> And it costs you $5 per month for 36 months for the equipment on that
>> customer... that's pretty cheap even if you only charge $29 per
>> month. :)
>>
>> Whatever happens in the future... It will NOT be the same as today.
>> Inflation or deflation will happen. No way around it. Congress has
>> already taken on more debt than can be serviced. Neither scenario
>> will
>> let you survive being in debt.
>>
>> Besides, don't expect to be able to lease equipment at any rate or
>> terms
>> within 6 months.
>>
>>
>> Travis
>> Microserv
>>
>>
>>
>>
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> --------------
> Chuck Bartosch
> Clarity Connect, Inc.
> 200 Pleasant Grove Road
> Ithaca, NY 14850
> (607) 257-8268
>
> If all is not lost, where is it?
>
>
>
>
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