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Small telecommunications businesses face many hurdles in trying to compete in the marketplace with the big telecom giants. While your small telecom company can offer your local customers better and more personalized services than the big telecom companies can, there are many barriers to getting your message out there and growing your market share. Just as the old adage about getting a job without experience goes, it is hard to grow your business when you need all of your working capital just to run your business day to day. While the telecom giants can call up their banker and get a loan, it isn’t as easy for your small business to do.

For hundreds of years companies have been utilizing the value of their assets as collateral for borrowing money. Your distant relative who owned a small grocery store may have used his inventory and property value as collateral for borrowing money to add onto his building or replace his antiquated refrigerators. As a small telecommunications business you may want to take a similar action in order to grow your business and service offerings.

As you may have experienced, most of the major financing companies out there just plain do not understand how telecommunications businesses work. Unless you are AT&T, or another large telecommunications company, with a monthly billings total of over 5 million dollars, most typical business finance resources are not that interested in talking to you. It isn’t that they are not interested in your business and its success; they just simply do not understand how telecom billings work.

As a small business owner, a potential lender may ask you to make a personal guarantee or sign a recourse agreement in order to obtain funding. This can be a scary proposition and place you personally at a risk level you may not be comfortable with. If you come to this point with a lender then it is time to move on and look for a better alternative.

One alternative available in telecom financing is factoring. Factoring is the process whereby your company can borrow money against its receivables. Traditional factor rates however can be high, because lenders balk at the way telecommunication company’s bill, and the relatively small amounts of each individual billing. If you are able to locate a lender who will give you a discount, because they understand the uniqueness of telecom financing, factoring can be a good option to explore.

Another alternative you might consider for your telecom funding needs is an asset based solution. By securing your funding with your contracts, equipment or other assets, you can borrow against them and use the additional capital to expand your business. Asset based solutions can be a bit easier to find, and cheaper than trying to do a receivables factor.

A third alternative to explore is the idea of an investment capital cash infusion. If you are open to using investment capital this can be a wonderful way to grow your business.

While telecom funding can be hard to find, there are options open to small telecom businesses. By considering all of your options and selecting the one which fits your business the best, you can be well on your way to growing and expanding your business.

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 rather quickly determine if your business is able to receive some small business financing from them or not. However, as the owner of a telecommunications company you know that this is not always the case for your industry. Traditional lenders just simply do not understand how telecom companies do business and the intracacies of telecommunications funding.

If you are a large multi-national telecom company, funding abounds for you just 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 with many customers. Generally, your receivables take 45 or more days to receive 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 readily availablec to you for obtaining small business financing. These three options are: 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 borrow money against its receivables; your receivables are used as the collateral for the loan. The down side to traditional factoring is that this type of funding generally comes with high interest rates. By finding a lender with telecommunications financing experience, you can sometimes find a lower rate. This makes factoring a strong consideration only if you are able to locate a specialized lender with telecommunications financing 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 very small local telecom company, your company may not have the assets or contracts to make this form of funding work. In that case, investment capital may be a good option to consider.

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 small telecom company to expand you should consider factoring, asset based solutions, and investment capital as possible options. Whatever your decision may be, as long as it fits within your long-term business plans, then you are sure to succeed.