Just for round representative numbers, lets say you have have a pretty established customer base and you have the staff and the growth potential to install $10k/month worth of new CPE.
I would buy $10k/month worth of CPE to get what I need when I need it. When I have more customers, I can spend proportionately more. If you lease enough CPE to cost you $10k/month, you have a big pile of CPE sitting around that's costing you money and isn't making money. You eventually get them installed, and can repeat the less efficient stepwise function again. If you break it down to lower amounts, it's still a stepwise function of outlay versus return. After a while, you'll have reached a certain size where the lease or loan bills will be higher than the cost to continue the same growth rate without borrowing. If something happens where we each have a couple real bad months of business, I can just defer some installs or upgrades, which would not be pleasant. You would be unable to pay the leasing company, which could be less pleasant still. If a loan or lease helps you get better CPE, it's worth it though. I think buying quality gear with a loan or lease is a better plan than suffering with junk you bought because it was all you could afford to scrouge together or because some non-technical manager was too cheap. I'm not at all against loans or leasing. I built a nice datacenter with a loan, as I would not have been able to build it any other way. It's been really useful and worth every penny. I bought a tower site with a mortgage, I have a tenant whose lease pays the majority of the payment, and it's almost paid off. I recently accepted a private loan to put infrastructure in an area that was without broadband; it was simpler and faster than applying for a grant and it got them to the top of the list of our projects, as there is still more demand than any one company's means. On Fri, May 22, 2009 at 10:10:26AM -0600, Travis Johnson wrote: > Lease, lease, lease.<br> > <br> > Why spend money each month paying for CPE up front for every customer? > Are you doing that with bandwidth? Are you doing that with employees? <br> > <br> > We spend $7 per month per CPE for 36 months. It's just part of "doing > business"... just like insurance, bandwidth, payroll, etc. It's one of > those monthly expenses that is just part of operating in this industry. > We then use the install fee to cover the truck roll, router, etc.<br> > <br> > So we are making a profit on every single customer we install starting > from the day they are installed.<br> > <br> > Travis<br> > Microserv<br> > <br> > jp wrote: > <blockquote cite="mid:20090522152952.gb15...@saucer.midcoast.com" > type="cite"> > <pre wrap="">On Thu, May 21, 2009 at 10:49:01AM -0500, Charles Wu wrote: > </pre> > <blockquote type="cite"> > <pre wrap="">With all the hype being generated by the stimulus bill, we > have been approached by a multitude of third party financial organizations > that have a renewed interest in potentially financing rural broadband...now, > specifically, for WISPs, in the past, equipment leasing has been a very > popular option for financing, but in looking at our numbers over the past > year, I've noticed a marked decline in the amount of leasing that we do - > that said, I have the following questions for the listserv about financing > > Assuming that WISPs are still need to buy equipment... > > 1. Are you able to just purchase equipment out of cash-flow > organically generated from operations > </pre> > </blockquote> > <pre wrap=""><!----> > Yes, unless it's a large project on a short time table. We've been > buying wireless gear for 11 years now. In the early years, our wireless > deployment was funded by dialup revenue, but now it's a self-sustaining > major part of our business, and dialup is a very small part. We've had > some loans for big deployments in the past, and the amounts of money > spent on loan repayment currently are comparable to what we'd be > spending on equipment to meet current demands. So as those are paid off, > we have more money to spend on gear each month. We'll save our loan > tolerance for big projects that require high capex, and buy customer > radios and modest project infrastructure out of our pocket every month > or a shorter term line of credit. > > Things like Alvarion's comnet let us get quantity pricing breaks on > radios as long as we commit to regular CPE deliveries of certain > quantity levels, so that works good for cash-flow focused ISPs. > > </pre> > <blockquote type="cite"> > <pre wrap="">2. Have you gone to more traditional forms of money (e.g., > bank / > SBA / RUS loans)? > </pre> > </blockquote> > <pre wrap=""><!----> > We've had bank loans and SBA backed bank loans in the past. > > </pre> > <blockquote type="cite"> > <pre wrap="">3. Are you doing more vendor leasing programs (e.g., > Motorola 3% > financing deal) > </pre> > </blockquote> > <pre wrap=""><!----> > No. > > </pre> > <blockquote type="cite"> > <pre wrap="">4. Have you not been able to borrow money due to the > credit > crunch (e.g., not deploying as aggressively) > 5. Are you holding off on deployments because of the economy > </pre> > </blockquote> > <pre wrap=""><!----> > I could be deploying a lot more if the economy were better and more > people were more willing to get nicer Internet services. > > </pre> > <blockquote type="cite"> > <pre wrap="">6. Have you gone to Agility...<cough> Louie the > loanshark =) > </pre> > </blockquote> > <pre wrap=""><!----> > I've investigated leasing, and it appears to be a choice for when the > bank doesn't want to deal with you. If I had that sort of relationship > with the bank, I'd want to fix that before spending more money. > > > </pre> > <blockquote type="cite"> > <pre wrap="">Or any other thoughts / comments on this topic? > > -Charles > > > -------------------------------------------------------------------------------- > WISPA Wants You! Join today! > <a class="moz-txt-link-freetext" > href="http://signup.wispa.org/";>http://signup.wispa.org/</a> > -------------------------------------------------------------------------------- > > WISPA Wireless List: <a class="moz-txt-link-abbreviated" > href="mailto:wireless@wispa.org";>wireless@wispa.org</a> > > Subscribe/Unsubscribe: > <a class="moz-txt-link-freetext" > href="http://lists.wispa.org/mailman/listinfo/wireless";>http://lists.wispa.org/mailman/listinfo/wireless</a> > > Archives: <a class="moz-txt-link-freetext" > href="http://lists.wispa.org/pipermail/wireless/";>http://lists.wispa.org/pipermail/wireless/</a> > </pre> > </blockquote> > <pre wrap=""><!----> > </pre> > </blockquote> > </body> > </html> > > > -------------------------------------------------------------------------------- > WISPA Wants You! 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