How to take out a loan to support your Telecommunications Business
Starting up a telecommunications business? Read below to learn about the financial support you can receive via loans and how WBL can help.
The telecommunications business is poised for growth in 2020. Network, infrastructure, and equipment vendors anticipate 89% year over year growth for 5G technology. Couple this with the scheduled phase-out of older technologies such as the copper wire-based analog line—and the telecommunications sector is in for some large-scale disruptions and growth.
Telephone service providers, data service, even cable television, and satellite service providers and installers are staring down the barrel of double-digit market growth in the foreseeable future.
Businesses have two choices when it comes to getting the capital that they need for growth. Dilute ownership or get a loan. Adding more owners is often ill-advised. Learn how to take out a loan instead!
Read on to learn more.
Lots of companies look healthy on paper. A look at the books indicates a favorable balance between assets and liabilities. So why is the company struggling with payroll or inventory?
Simply put, working capital is the value of the current assets less current liabilities. It’s the money required to run the day-to-day operations. Insufficient working capital or inefficient working capital management places the liquidity, solvency, and profitability of a company in jeopardy.
Often a company has sufficient assets to fund company growth, but the assets lack liquidity. If this is the case, the best route is probably a loan.
What Kind of Loan?
Before you get into how to take out a loan, you need to choose the right kind of loan. Traditional commercial loans probably offer the lowest interest rates for repayment, but require lots of lead time, meticulous documentation and a multi-step review.
Business Term Loans
These loans have a three to five year payback time and a fixed monthly payment or lump sum at the end of the term. These can be secured or unsecured on property.
Short Term Loans
Short term loans are quick to fund, a little more costly and are paid back in three to eighteen months. These can be secured by real estate or other assets or unsecured.
Working Capital Loans
Working capital loans are used to cover short-term operational needs. These can be open like a line of credit or a fixed term.
These types of loans are used to fund specific machinery or tools and are secured by the equipment.
Accounts Receivable Financing
Factoring allows you to sell accounts receivable at a discount. Don’t want to sell them? A loan secured by your accounts receivable is the answer. Repay the loan when your customer pays.
Merchant Cash Advance
These loans facilitate borrowing against future earnings with flexible repayment terms.
Choose the best type of financing for your needs. If you need speedy access to funds select:
- Merchant Cash Advance
- Accounts Receivable Financing
- Short Term Loans
Other types of loans are better suited to long-term, capital intensive projects.
How To Take Out a Loan
For a traditional bank loan, you may need to fill out an application, present a proposal of how you will use the funds, meet with a bank officer and present your financial statements.
Alternative lenders may have streamlined procedures. In any case, it helps to have all of your paperwork in order. You might want to keep a digital file of PDFs and a paper file of copies just in case.
You will need these papers often—sometimes several times!
1. Proof of Legal Business Structure
Lenders need to know who legally owns your business. It could be a sole proprietorship, a partnership, a limited liability company, or a corporation.
Sole proprietorships should have a Proof of DBA Registration.
Partnerships need their business agreement and possibly their DBA.
A Limited liability company (LLC) needs its Articles of Organization and the LLC operating agreement
Corporations need their Articles of Incorporation, Bylaws, etc.
These documents establish the ownership of the business as well as your right to use the business for a loan.
2. Business Licenses and Permits
Keep a copy of these items handy. If you need state or federal licenses and permits, include them. Almost all business activities need a license from the local county or city.
Ensure that the license and permits are valid. Expired or missing permits can prevent you from doing business.
3. Employer Identification Number (EIN)
This assigned number comes from the Internal Revenue Service (IRS). Corporations and partnerships need EINs. A sole proprietorship needs an EIN only if it has an employee other than the owner. Most banks require an EIN to open an account.
If a sole proprietor does not have employees, banks and the IRS permit the use of a Social Security Number or Individual Taxpayer Identification Number (for non-citizens)
A bank or other loaner needs to know something about your business.
1. Financial Statements
These are different from your bank statements. They provide information about the finances and the health of your business and include:
- Profit and loss statement
- Balance sheet
- Cash flow statement
These three statements provide a snapshot of your company’s financial performance for the previous year and at least two years before that.
2. Bank Statements
These should agree with your financial statements. Your business name on all accounts needs to agree with your application and your other statements.
3. Accounts Receivable Aging and Accounts Payable Aging
These two reports are of interest to the lender if you plan on using the loan for working capital or you are borrowing against these assets.
4. Details of Any Other Loans
If you have other loans, this could affect your ability to pay back a new loan. A lender wants to know this information.
5. Proof of Collateral
If you furnish real estate or other assets to secure your loan, you will need proof that you actually own the property and you have the right to provide it as collateral.
It Seems Daunting, But It Isn’t
How to take out a loan is a simple matter of finding the right partner. WBL has many years of experience with the telecommunications business and can help you find the right loan quickly and efficiently. Ready to discuss our expedited process?
Contact us today!