>The banker was not impressed that we owned all our >assets and told us to start financing EVERYTHING. Remember, banks make >money on loans and your ability to pay them. They don't make money on >assets. (Just like they don't want to hold thousands of foreclosed homes.)
That is probably the best advise that I have heard on this topic, so far. Its the dead honest truth. We learned it the hard way, and it is very frustrating. The bank puts very little value (possibly none) on assets that are not instantly liquidatable or accessible to pay monthly loan payments. Tom DeReggi RapidDSL & Wireless, Inc IntAirNet- Fixed Wireless Broadband ----- Original Message ----- From: "[email protected]" <[email protected]> To: "WISPA General List" <[email protected]> Sent: Friday, January 02, 2009 8:49 AM Subject: Re: [WISPA] Congress may help smaller ISPs grow > Why worry about money not being available later if you can get it now? > Borrow, borrow, borrow and borrow some more. If the markets dry up, we'll > still have the leases and we can start paying cash for everything like > everyone else. > Our leasing is the same as what Travis described as far as rates and > terms. > We save the same 20% on CPE while only paying 10% during the lease term. > This has also allowed us to purchase licensed backhauls and upgrade other > parts of our network. So, if a credit crunch hits, our network has > already > been upgraded and has plenty of capacity to grow even if we can't lease > another radio. > > When we started, we started cash only and only purchased new gear when we > had enough of a cash reserve. Over time we thought leasing might be > better > and went to the bank. The banker was not impressed that we owned all our > assets and told us to start financing EVERYTHING. Remember, banks make > money on loans and your ability to pay them. They don't make money on > assets. (Just like they don't want to hold thousands of foreclosed > homes.) > Leasing allows you to keep more cash in your pocket for reserves AND keep > more equipment on hand. > > Leasing has also reduced our shipping costs. When we paid cash for > everything, we might buy a week or months worth of equipment. Then you > get > a sudden spike in demand and you have run out and order more equipment > with > faster shipping times. And then you find the vendors don't have anything > in > stock and you are screwed. > > The more you lease today, the more cash you'll have in your pocket to buy > equipment tomorrow if leasing isn't an option. > > On Fri, Jan 2, 2009 at 1:30 AM, Josh Luthman > <[email protected]>wrote: > >> Again, I want to apologize for the pissing contest I created here. >> >> While I do appreciate the input I highly disagree with some of the >> language >> and attitude here. Can we please stop this thread? >> >> Josh Luthman >> Office: 937-552-2340 >> Direct: 937-552-2343 >> 1100 Wayne St >> Suite 1337 >> Troy, OH 45373 >> >> Those who don't understand UNIX are condemned to reinvent it, poorly. >> --- Henry Spencer >> >> >> On Fri, Jan 2, 2009 at 12:12 AM, <[email protected]> wrote: >> >> > Travis... I don't "bet" money on non-productive things. IE, I don't >> > gamble. It's a moral thing. >> > >> > But, here's why I am saying you're not going to be able to... >> > >> > 1. Over the last 2 decades, industrial finance has been mostly done by >> > direct sales of bonds on the open market. This has fallen almost 90 >> > percent in the last 6 months. >> > >> > 2. Larger and institutional borrowers have been either delaying >> > investments, or paying higher rates to float commercial paper. Recent >> > treasury rates have shown that insitutional investors are willing to >> > pull >> > money from any business venture and buy bonds instead, at LESS THAN 1% >> rate >> > of return. >> > >> > 3. This has caused the lenders for larger institutions to slow >> > lending. >> > >> > 4. This is going to start cannibalizing the smaller institution's >> > remaining >> > capital, as large companies borrow from, or lease from ever smaller >> > entities, since they're the only ones with any available capital right >> now. >> > >> > Smaller banks and regional banks are still moderately healthy, but with >> > regulators suddenly breathing down their necks, they're suddenly "risk >> > averse", to try to keep institutional investors from pulling money out >> and >> > having the regulators start blasting holes in thier portfolios of paper >> > they >> > hold as assets. Rules are, that what that paper can be sold for on >> > the >> > open market, is the value it must be valued at. >> > >> > A grade paper sells at a steep discount. B sells at a severe >> > discount. >> > C >> > or less is is now sold at less than 10% of it's face value. So, even >> the >> > solvent banks are having to start limiting exposure to anything that >> > even >> > faintly looks "risky". >> > >> > So, you're likely not dealing with any of those. You're likely using a >> > company that was capitalized with cash of investors a number of years >> ago, >> > owns its own portfolio of paper, and has relatively limited debt. >> > Yes, >> > they're calling and saying "we have money to lend". And they do. But >> > it >> > is >> > quite limited. Once the larger borrowers arrive in that market, it will >> be >> > sucked up faster than feathers in a hurricane. >> > >> > Due o the shorter term nature of their lending or financing, you'll see >> > a >> > small trickle continue. >> > >> > However, it is also true that the credit standards for even those have >> run >> > upwards a lot, cutting off smaller and non-established prospective >> > customers >> > like me and most WISP's. They are raising the finacial requirements >> > of >> > who >> > they finance a lot. That's going on considerably and has been for >> > some >> > time. >> > >> > Will your lender or leasing co be able to do anything for you in 6 >> months? >> > I would not bet the company on it. I absolutely would NOT depend on >> > it >> > for >> > the next 18 months. Re-write your business plan. Have a contingency >> plan >> > in place. Have one for no credit being available. That's gone from >> "not >> > thinkable" to "likely" in just 6 months. >> > >> > That's the wiser "bet", by a million times. >> > >> > >> > >> > >> > >> > ++++++++++++++++++++++++++++++++ >> > <insert witty tagline here> >> > >> > ----- Original Message ----- >> > From: "Travis Johnson" <[email protected]> >> > To: "WISPA General List" <[email protected]> >> > Sent: Thursday, January 01, 2009 8:47 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 >> > > >> > > [email protected] wrote: >> > > ++++++++++++++++++++++++++++++++ >> > > <insert witty tagline here> >> > > >> > > ----- Original Message ----- >> > > From: "Travis Johnson" <[email protected]> >> > > To: "WISPA General List" <[email protected]> >> > > 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 >> > > >> > > >> > > >> > > >> > > >> > >> -------------------------------------------------------------------------------- >> > > WISPA Wants You! Join today! >> > > http://signup.wispa.org/ >> > > >> > >> -------------------------------------------------------------------------------- >> > > >> > > WISPA Wireless List: [email protected] >> > > >> > > Subscribe/Unsubscribe: >> > > http://lists.wispa.org/mailman/listinfo/wireless >> > > >> > > Archives: http://lists.wispa.org/pipermail/wireless/ >> > > >> > > >> > > >> > >> > >> > >> > >> -------------------------------------------------------------------------------- >> > >> > >> > > >> > > >> > > >> > >> -------------------------------------------------------------------------------- >> > > WISPA Wants You! 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Join today! >> http://signup.wispa.org/ >> >> -------------------------------------------------------------------------------- >> >> WISPA Wireless List: [email protected] >> >> Subscribe/Unsubscribe: >> http://lists.wispa.org/mailman/listinfo/wireless >> >> Archives: http://lists.wispa.org/pipermail/wireless/ >> > > > -------------------------------------------------------------------------------- > WISPA Wants You! Join today! > http://signup.wispa.org/ > -------------------------------------------------------------------------------- > > WISPA Wireless List: [email protected] > > Subscribe/Unsubscribe: > http://lists.wispa.org/mailman/listinfo/wireless > > Archives: http://lists.wispa.org/pipermail/wireless/ > > > -- > No virus found in this incoming message. > Checked by AVG. > Version: 7.5.552 / Virus Database: 270.10.2/1871 - Release Date: 1/1/2009 > 5:01 PM > -------------------------------------------------------------------------------- WISPA Wants You! 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