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ASSET-BASED FINANCING FOR TELECOMM COMPANIES

What is asset-based lending?

Asset-based commercial loans are loans supported by the pledge of a borrower's accounts receivable, inventory, equipment, leases, or a combination of these and other assets. When a loan is structured so that advance rates are implemented to compute a borrowing base, the facility is classified as an asset-based formula loan.

Accounts receivable and inventory are generally considered to be good collateral to lend against because of their liquid nature and the Bank's ability to define and monitor their values. In the normal course of business, inventory is sold and accounts receivable are created. The accounts receivable are then collected and the cash proceeds repay the loan.

The value of accounts receivable and inventory fluctuate continually with the business activities of the borrowers. In order to rely on these assets as a source of repayment, their current quantities and values must be continually tracked and monitored. It is necessary to know at all times if the collateral is sufficient in value to repay the loan.

What's in it for telecommunications companies?

For emerging and/or growing telecommunications and other high tech businesses, there are now lending organizations that focus specifically on the lending needs of the telecomm/high tech industries. The best of such lending organizations can support businesses requiring working capital during periods of rapid growth, turnaround and special circumstances such as mergers, acquisitions, and leveraged buy-outs. The best lenders will offer a broad line of product applications individually structured for each client; including accounts receivable and inventory advances as well as term loans and equipment acquisition financing.

One example of such a lender is Coast Business Credit, whose clients include equipment, software, and telecommunications companies, among others. With a deep understanding of the telecomm industry, lenders such as Coast are able to arrange amount-appropriate finincing investor and venture backed growth for their high tech and telecomm clients.

Information provided by Coast Business Credit, a lender to the Telecommunications industry and other related business sectors.

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