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Telecom Business Loans – Telecommunications Financing

Telecom Financing

Most people today use some form of telecommunication every single day without even realizing it. Originally, telecommunication was the telegraph, and later the telephone. Obviously today the telecommunication sector has drastically expanded thanks to the major innovative technological advances in society – the technological advances of the telecommunications industry has completely shifted the way people use technology and how people overall live and do business today. Evolution of society and technology has transformed the process of telecommunications from requiring physical wires in order to connect homes and businesses to shifting into mobile technology and wireless technology that now dominates the way we communicate.

The telecommunication industry is one of the most diverse industries in the United States today, as well as indirectly effecting almost every other industry – if a business is using any form of technology to communicate or effectively run a business, chances are the telecommunication sector had something to do with it. Some of the major segments in the telecommunications industry include, but are not limited to: wireless communications, communications equipment, processing systems and products, long distance carriers, domestic telecom services, foreign telecommunication services, diversified communication services – basically, the telecommunications industry encompasses all aspects of communication technological services and products. This major growth in the telecommunications industry in the last few years has led to the telecommunications sector becoming vital in today’s society, leading to an unavoidable reliance on telecommunication companies’ capability to be essential in the health and competitiveness of the United States economy.

With the constantly changing definition of telecommunications due to the continuous innovation in this industry, the telecommunications industry today now, in laments terms, is considered the suite of technologies, devices, equipment, facilities, networks, and applications that support communication at a distance. The consistently developing telecommunications industry has even revolutionized the overall infrastructure of the telecommunication industry, resulting in a horizontally homogeneous layered structure; this has led to a multitude of applications becoming one capability among many in the telecommunication sectors.

Telecom Industry Data and Statistics

As mentioned above, the telecommunication industry encompasses a variety of service providers, including telephone companies, cable system operators, internet service providers, wireless carries, and satellite operators – essentially, the lengths of what the telecommunication industry covers are endless. While this diverse industry has led to an increase in rules and regulations, resulting in a more complex industry, it has also greatly impacted the United States society and economy; the telecommunication industry has also given the United States a competitive edge in the global market. Societal impacts from the telecommunication industry has shifted three key areas:

  1. Providing a technological foundation for societal communications, thus playing a central role in the fundamental operations of today’s technologically driven society. Effective communication is the essence of what distinguishes an organization, community, or society from a collection of individuals – especially today when consumers are demanding to have information and communication in a matter of seconds.
  2. Enabling participation and development in around the world in regions that are disadvantaged by geography either due to living in a rural area or in a developing nation. By the United States investing and capitalizing on this need, the telecommunication sector is constantly growing and remaining profitable.
  3. National security is at the forefront of many people’s minds today – natural disaster recovery, homeland security, protecting national intelligence, and military superiority are all vital parts of society today that are always in need of higher security.

Telecommunication Industry Trends

The telecommunication industry is one of the largest contributors to the United States economic growth, which is only expected to continue to rise with the growing consumer demands for obtaining access to communication networks everywhere. Not only has the telecommunication industry greatly contributed to the GDI, but the telecommunication sector has also become a major United States employer, especially when looking at all related industries that are directly and indirectly effected by telecommunications.

With the United States having one of the largest and most effective telecommunication industry’s in the world today, growth in United States productivity and innovation throughout the telecommunication sector is vital to remaining on top in this incredibly diverse industry. Luckily, the United States has continuously invested in decades of research to help develop the best products and services in the industry, but if telecommunication companies are not capitalizing and transitioning into focusing on the current trends and consumer demands, there will be increased competition among global competitors who are working hard to surpass the United States.

Telecommunication Industry Forecasts

There is such a diverse market in the telecommunications sector that the amount of emerging trends for 2016 and 2017 are endless, but there are a few key areas that telecommunication businesses should pay attention to in order to stay on top in this competitive industry. Also remembering that while many of these ventures are important to growing every telecommunication business, many of these transitions can be expensive and difficult to cover, so reviewing the finance options below can help, especially if it is a small or medium sized telecommunications business looking to gain an edge against the major competitors and to help them expand.

  • Shifting into horizontal business models is key in today’s telecommunication industry; whether this is strategically encompassing a combination of models or specializing in one specific area, this decision will define many different telecommunication companies:
    • Network Guarantors – Offering network infrastructure and services.
    • Business Enablers – Monetize assets by opening up infrastructures and extending business strategies.
    • Experience Providers – Offering the best combination of applications and content with a high level of user experience.
    • Global Multi-marketers – Expansion into multiple segments and markets through a combination of the other three markets listed above in order to build a value through the creation of synergies among different markets.
  • The Internet of Things is revolutionizing not only the telecommunication sector, but almost every single industry today. This will continue to add billions, if not trillions, of new connected data sources globally as consumers start demanding smart homes, cars, and so much more.
  • There were over 180 billion applications downloaded globally in 2015, and this number is only increasing well into 2016. This has led to a reliance from businesses in every sector on business intelligence (BI) applications through telecommunication systems – this is leading into the largest impact of a businesses’ telecommunication needs.
  • Mergers and acquisitions are nothing new in the telecommunication industry, however strict rules and regulations have been put in place to try and avoid monopolistic practices. In order to stay ahead of the competition, existing telecommunication businesses need to be focusing on creating innovative products, or simply merge with other companies.

Types of Telecom Loans

Types Rates Terms Funding
Bank 6-10% 3-7 years 14-30 days
SBA 6-10% 3-7 years 10-30 days
Line of Credit 5-15% 1 – 3 years 7-30 days
Alternative 6-25% 1-5 years 5-7 days
 Cash Advance 1.16-1.55 3-24 months 1-3 days
Invoice Finance 1-2% weekly 1 – 90 days 1-3 days

Telecommunications Bank Loans

For telecommunication companies with great credit and detailed business documentation, traditional bank loans and lines of credit are the best option. This is due to the great rates and terms offered by traditional banks.

  • Rates: 4-10%
  • Terms: 1-5 years

Telecommunications SBA Loans

SBA loan options are the next best type of business loan for telecommunication businesses that cannot obtain a traditional loan. Should the telecommunication company default on their loan, the government agrees to cover a portion of the lenders losses.

  • Rates: 6-8%
  • Terms: 7-25 years

Alternative Telecom Loans

Alternative business lending, or mid prime loans, are the next best option for telecommunication companies. Non-traditional lenders will look at cash flow rather than credit and can provide funding within days.

  • Rates: 9-16%
  • Terms: 1-5 years

Asset Based Telecom Financing

Asset based lending allows telecommunication companies to leverage accounts receivable to obtain financing. Another type of asset based financing is when a company uses commercial property or the owner of the company’s personal real estate as collateral for financing.  If a company has strong AR, they may even be able to obtain a line of credit secured by the accounts receivable.

  • Rates: 8-25%
  • Terms: 6 months – 3 years

Telecom Equipment Leasing

Telecom equipment leasing is a popular choice among communication companies looking to obtain needed equipment without having to pay the full price of the equipment upfront.

  • Rates: 6-20%
  • Terms: 1-10 years

Telecom Company Cash Advance

Cash Advance business loans (sometimes called ACH Business Loans) are a great option if a telecommunication company has bad credit in the past or needs short term working capital quickly. This form of short term funding typically comes with high interest rates, but will provide funding immediately.

  • Factor Rates: 1.16-1.50%
  • Terms: 4 months – 2 years

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