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Telecom Invoice Factoring.
Running a business is not an easy task, especially in the the telecom and wireless industry where technological developments move quickly. Wireless carriers must make sure their networks offer the most coverage while cable operators must make sure that their plans include the most robust data, video and VoIP services. Not only do telecom and wireless companies need to meet a certain average revenue per user (ARPU), they also need to stay competitive and be a step ahead in terms of their technology and offerings.
Given the high costs of technology development and the pressure of competition, many companies in this space may find themselves cash-strapped. Luckily, there is a solution for companies in this situation, and it is called "telecom invoice factoring".
Telecom factoring is a debt-free financing solution for companies experiencing low cash flow. These companies must normally issue invoices that are paid within 30 to 120 days. Thanks to invoice factoring, telecom companies can have the opportunity to grow and focus on being competitive.
What types of companies benefit from telecom invoice factoring?
Telecom factoring is ideal for telecom suppliers and small- to medium-size businesses (SMBs) where cash flow is limited. SMBs that work with large telecom providers will find invoice factoring especially usefulbecause large telecom providers are notoriously known for having long processing time to pay back all of their invoices. For small and medium telecom service providers and manufactures who depend on incoming payments for cash flow, telecom invoice factoring provides the flexibility and additional runway to grow their business.
How would telecom companies benefit from cash flow? Even though Telecom is a growing billion-dollar industry, it is also growing in competition. It is just as difficult to enter the market as it is to stay in the market. For that reason, telecom invoice factoring can benefit all types of telecom companies and services, including phone services (wired or wireless standard), Internet, television, and networking for businesses and homes.
Like with any other industry, in the telecommunication industry, cash from invoice factoring can go towards solving issues regarding operation costs:
Additional benefits for telecom companies:
Invoice factoring is essentially a sale of invoices from one company to another. This means if a business is interested in telecom invoice factoring, this business will need to reach out and find a factoring company that specializes in working with telecommunication companies. Here is a breakdown of how telecom invoice factoring companies would work:
Part 1 - Shopping for a Factor
Before the process begins, telecom companies need to first make sure they have already sent out their bills with net terms between 30 to 120 days. After all, if the company does not have any invoices, then they have nothing to offer to “sell” to factoring companies to receive financing.
After this, the telecom company must select a factoring company out of the hundreds available that offer the best rate and are the best financing plan for them.
Once they have picked the factoring company, the telecom company will need to apply and see if they qualify for financing from the factoring company. This may also include some credit checks on the clients to predict whether the customers will be likely to pay the invoices on time, if at all. If the telecom company passes the review, they can begin negotiating terms and signing an agreement with the factoring company to work out all details regarding fees and advancement.
Part 2 - Assigning the Factor
Now that the agreement has been agreed on and signed, the telecom company will receive an advancement from the factoring company within a few days. The amount is usually called the advance rate, which would be between 80% to 90% of the invoice’s value.
There will also be some changes to how the invoice will be paid. After the invoice factoring plan has been set, the factoring company now holds responsibility for bill collections and will reach out to the telecom company’s clients to inform them of this factoring agreement as well as the new instructions on how to pay the bill.
Part 3 - The Factor is Paid
A few weeks later, after the client has paid off their bills, the factoring company will wire or transfer over the remaining balance of the invoice, known as the reverse amount, to the telecom company. As compensation for their services, the factoring company will also keep a portion of the reimbursement as their rebate, or service fee, from the remittance. The entire invoice factoring process is now completed.
While telecom invoice factoring is a great solution for companies, it is not always a perfect fit. For that reason, many telecom companies also consider telecom receivables financing.
Like invoice factoring, invoice financing involves a third party to provide cash advances on invoices.
How invoice financing with Fundbox is different from traditional invoice factoring:
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