Most lenders I've worked with really don't seem to even consider lending against recurring revenue as the recurring revenue is what they will use to justify to themselves, board, investors, and the FDIC that it's a reasonable loan. The recurring revenue is not really considered an asset because if the business goes south, the recurring revenue is gone and their left holding basically nothing but blue sky. Hard assets can be sold and at least recoup a portion of what they loaned the business.
There are plenty of places out there that will do Accounts Receivables loans, but most of those seem to be kinda like the payday loan people. Big fee up front, and huge interest rates. -----Original Message----- From: wireless-boun...@wispa.org [mailto:wireless-boun...@wispa.org] On Behalf Of Charles Wu Sent: Friday, May 22, 2009 8:44 AM To: WISPA General List 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! Join today! http://signup.wispa.org/ ---------------------------------------------------------------------------- ---- WISPA Wireless List: wireless@wispa.org 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: wireless@wispa.org Subscribe/Unsubscribe: http://lists.wispa.org/mailman/listinfo/wireless Archives: http://lists.wispa.org/pipermail/wireless/
