Alternative Funding Provides the Engine that Keeps
The 5G buildout has made unprecedented demands on the wireless infrastructure industry, and the resulting expenditures on equipment and personnel have created stress on the bottom lines of general contractors and subcontractors.
“The demand for subcontractors and general contractors from the crush of 5G build projects snowballs into the need for cash flow or capital to continue to run these businesses,” Tom Joerger, Kompass Funding Director of Operations, said. A critical resource helping companies to make payroll and cover operational expenses during this time is alternative funding, a solution offered by Kompass. This engine keeps companies moving forward at full speed.
“We want to be the power source behind their growth and alleviate their financial burden and stress, so that they elevate to the next level, taking their business wherever they want to go,” Abigail Czinege, Director of Strategic Advancement, shared.
Kompass purchases accounts payable from clients to pay their subcontractors and suppliers faster through their reverse factoring solution, Kompass Accelerate. This service allows a company to streamline its organization by outsourcing its accounts payable to Kompass.
“[Kompass Accelerate] is a scalable and sustainable business solution that bridges the financial supply chain gap, increases working capital, speeds up payments, and it can generate revenue through our revenue sharing program,” Joerger said.
Here’s how it works. Kompass’ team reaches out to a client’s subcontractors and offers them the opportunity to enroll in Kompass Accelerate. Once a subcontractor is enrolled, Kompass Funding will early pay their invoices on a weekly basis, upon approval of their client. The client will then pay Kompass Funding according to their normal payment terms.
As companies wait 30/60/90+ days for customers to pay, Kompass has seen rising demand for its Kompass 24 service. Equivalent to factoring or invoice discounting, the company purchases invoices at a discount, which provides immediate funds and working capital.
“We can help accelerate either payables for the contractors or receivables to the general contractors and to the subcontractors so that they can get their funding early to continue to staff those projects and meet the demand from wireless providers,” Joerger said. With Kompass 24, Kompass essentially becomes a fully-integrated accounts receivable management team for its client.
In one recent example, Kompass helped a startup specializing in 5G underground boring. The company was winning numerous new projects but struggled to come up with the capital to purchase equipment and hire employees. Through Kompass 24, Kompass converted outstanding invoices into immediate funds, allowing their client to take on more projects, purchase new equipment, and feel confident about their payroll.
“Managing a business for small- and medium-sized company owners is really complex, especially when it comes to the financial side,” Czinege said. “We want to simplify those complexities, streamline processes and create efficiencies.”
The Kompass Way
During the pandemic, Kompass helped small- to medium-sized businesses with cash flow issues that didn’t necessarily qualify for the government stimulus. That demand has expanded to other companies now that the stimulus checks have ceased. Similarly, Kompass has reacted to rising inflation and interest rates by adjusting its prices to make sure its services remain affordable.
“We want to work together with our customers because we want to ensure it’s a viable solution for everybody involved,” Joerger said.
Alternative funding sources, like Kompass, fill a need that is not met by brick-and-mortar banking institutions. Traditional forms of lending have rigid underwriting requirements that small and new companies often don’t qualify for in terms of collateral and length of time in business.
“We’re able to provide lending to our clients in different ways that are flexible and obtainable,” Czinege said. “We can meet their needs based specifically on their current state of business.”
In the last year, Kompass, which prides itself on company culture, added seven employees. With a total of nine employees, Kompass is a small company, allowing it to quickly react and fill companies’ capital needs and tailor its services by the client, instead of offering cookie-cutter solutions.
“We want to be curious,” Czinege said. “We want to go into every relationship and really listen to understand our client’s needs, goals and ultimate dreams for their companies.”
In addition to factoring and reverse-factoring funding, Kompass provides Kompass Bridge intended to support a company as it moves toward permanent financing. “Our bridge financing is predominantly driven through strong relationships and centers of influence in the midwest region,” Joerger said. “Our loans operate like a bank and require full financial documentation, business proposal and underwriting process.”
Kompass also offers the ability to convert outstanding debt into an equity stake, similar to traditionally structured equity deals. Kompass Access can fulfill the needs of Kompass’ specialty lending clients and larger, more mature firms.
“What makes us different is our services can grow with you and your financial needs,” Czinege said. “We strive to make every relationship mutually beneficial for our clients, partners, and us. We want to make sure that everyone wins so that we can maintain our clients as they grow and mature.”
By J. Sharpe Smith, Inside Towers Technology Editor