Telecommunications Financing

The telecommunications industry has become an integral part of the economy in the United States. Encompassing cell phone companies, all types of broadcasting, and wireless internet services, the industry is quite diverse.

The telecommunications industry is also quite flexible, as arising technologies have continually changed what’s possible and what’s expected. The Federal Communications Commission (FCC) has struggled to keep up with all of the new technology, industries, and companies. One of the most significant portions of the telecommunications industry is broadband or wireless.

The broadband infrastructure has expanded outside of big cities, but broadband access is still not available to everyone in the country. Some parts of rural America—not to mention rural areas in other countries—do not have access to broadband internet connection. To level the playing field and provide universal access, many broadband projects and broadband initiatives have risen to provide rural broadband funding.

Across the board, telecommunications companies need capital to improve services and expand their market. What are the funding options for telecommunications and broadband companies?

Wireless Broadband Financing Options

Most finance programs are not favorable to companies who need them. Either the deal doesn’t provide enough capital, or they require relinquishing control and/or equity.

Venture Capital: Compared with other means of raising money, you can obtain significant amounts of capital from venture capitalists. This is particularly helpful for a telecommunications company, where almost all of your income is based on accounts receivable.

While the capital does help your company grow, it comes with plenty of stipulations. An investment from venture capitalists or a private equity firm requires you to give up some control or equity in your company. Losing control or equity in your own company should not be the price of obtaining capital.

Angel Investors: Angel investors usually cannot provide the same quantity of money as venture capitalists. However, the best benefit they offer is in addition to the capital: coaching. Most angel investors already have significant business experience in your industry.

Another benefit is that most angel investors do not require you to repay them. However, the same downside that we see with venture capital afflicts angel investors: they require some control.

Bank Loans: A telecommunications company could obtain a bank loan as long as they have good credit. However, for a young or small company that either doesn’t have excellent credit or has not proven itself profitable, bank loans are nearly impossible to obtain.

There are other ways to raise capital for your company. However, these methods also involve negatives that usually outweigh the positives.

So, what other options are there? What if a telecommunications company needs capital but doesn’t want an unfavorable loan program that requires giving up control or equity?