> The big difference is that a car loan is tied to your personal credit, > just like a credit card,
So are most business loans, when they are made to a small business. I've yet to find a traditional lender willing to consider my business on its own. We just aren't large (signficant) enough, in their minds. So a car loan ONLY had personal colladeral. Wireless Gear has BOTH personal colladeral AND business colladeral and future generated revenue. Clearly that is a step up over a car loan's colladeral. The ONLY advantage a Car Loan adds, is every American is a prospective buyer. But they also forget, that every one is selling, so there is a lot of competition for the liquidation. A Wireless radio is a like a money tree, and the car is the opposite that consumes money off the tree. Clearly the wireless radio is the safer bet. > That said, I wonder if a case be made on financing secured by monthly > recurring revenue...thoughts? I guess we can argue that they already ask for financials, to look at monthly net profit. But a lender would never really care about revenue, because they'd never want to wait to sell your business to collect on a multiples of revenue. Thats what investors do. All leasors care about is how the payment is going to be made. What I will say is... Is I had successfully gotten a loan, by bringing in and showing the bank new signed long term monthly revenue contracts. Showing the new money that would be earned, if the loan was given. That worked. The side effect was.... 1) when they saw how much profit there was for the borrower, they raised the interest to try to get a higher piece of the action. 2) They wanted the contract term (length) to match the loan term (payback schedule). But for the borrower, the risk was significantly increased and growth potential significantly compromised, being forced to do a 1 yr loan for a 1 yr broadband contracts. Meaning, almost 100% of revenue went to pay the loan payment. This didn't meet the need of the bank or borrower based on risk. The secret was getting long term contracts (3yr), from customers. But its hard to get 3yr contracts from new subs that never tried a new wireless technology before. They always want to try it before they commit to it long term. So a catch 22 from the start. The other problem was... they then asked, what if the customer cancels, because you don;t provide your SLA. It was just to complicated for the average lendor, as average lenders generally re-sell the loans, and need to be able to easily justify the loan. But lending by monthly revenue does make sense, if the borrower can find a lender they can really talk to. The trick to prove is that there is a replicatable profit from every dollar of revenue, even if it is not shown on the books because it typically is reinvested by choice. Once a lender understands that, reporting and measuring revenue growth is one of the easiest things to provide and prove to a lender. For example, if your lender is your bank, they have the bank records to prove and see your deposits. There are programs already based around this for high risk borrowers. They look at your monthly credit card transaction or monthly bank deposits, and then give credit limit based on how much that is, and do auto payments from that source. Meaning the have a mechanism to take fro mthe revenue first. The only problem is they ONLY look at revenue, not at your business, and therefore label you high risk, and charge loan shark rates. I've seen it offered as high as 35-40% interest. I still think the only thing they'll ever consider is cash flow, and what has to be done is to get a lender willing to seperate what costs on your balance sheet didn;t have to be costs. Meaning what could be the company cash flow, IF the monthly profit was not re-invested? A lender has to understand your business to understand that. Which again is the problem. My personal opinion is there is no answer to the problem. The only answer is to be patient, and chip away at the problem every day, until the company can emerge to the stage that has healthy cash flow, and is worthy in the eyes of the traditional lendor. The only other answer is to find private lendors. That have fewer otpions to get a return on their money. Who are willing to take risk for higher reward. Anyone with any sense can see the high ROI in lending to a WISP with a good business strategy, and ultimately that it is less risk. Tom DeReggi RapidDSL & Wireless, Inc IntAirNet- Fixed Wireless Broadband ----- Original Message ----- From: "Charles Wu" <c...@cticonnect.com> To: "WISPA General List" <wireless@wispa.org> Sent: Friday, May 22, 2009 9:43 AM Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability > >I've never found a lender willing to lend against using the in-place used >>equipment as colladeral. >>It is the biggest double standard. >>I find it highly ironic that they'll use a car for colladeral that looses >>50% of its value the day it leaves the lot, and has a rate of failure and >>risk of damage higher than just about any product on the market, and it >>has >>a huge cash burn (gas :-). but yet lendors won't put equivellent value on >>wireless gear, that holds its value, Ebay boasting easilly 50% after 3-4 >>years of use, even after fully depreciated. >>I'll never understand the lending market. > > The big difference is that a car loan is tied to your personal credit, > just like a credit card, and very few are going to borrow $1 million for a > car (while plenty here could easily use $1 million for their network) > > FWIW, every industry specific vertical (e.g., restaurants, medical > devices, manufacturing etc) has the same problem when it comes down to > infrastructure financing -- traditional lenders won't finance > "business-specific machinery" -- rather, they only use "stuff they know" > as collateral (e.g., real estate, cash flow) > > That said, when it comes down to cash flow, it's worth analyzing and > understanding that most ISPs (specifically facilities based ones) are > probably pretty short on cash flow given the fact that > > 1. the business is based upon a recurring subscription model where I > invest (e.g., in CPE) to earn a residual contract (e.g., $50 / month > service) > 2. ISPs are generally cash-poor due to the fact that excess cash flow > usually gets reinvested into the business (more infrastructure) > > An argument could be made that the most valuable assets of an ISP are the > recurring contracts / revenue / etc -- and that's something that financial > institutions understand (e.g., receivables / factoring) and ultimately, > that's what an ISP is worth (some multiple of MRC) > > That said, I wonder if a case be made on financing secured by monthly > recurring revenue...thoughts? > > -Charles > > > -------------------------------------------------------------------------------- > WISPA Wants You! 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