Invoice Funding Fills Critical Gaps in Cash Flow for Telecom
A startup company needs more than just a great idea and a market of customers willing to pay for the products or services. The cold hard truth is it needs cash. Without collateral, bank loans are hard to come by. Initially, what can keep the doors open and the equipment humming is selling invoices that have been sent to their customers, known as factoring or invoice funding.
Kompass Funding specializes in providing telecom companies with programs designed to sustain cash flow by accelerating those invoice payments, according to Kompass Funding Senior Sales Executive, Ben Hagenkord.
“The companies can receive funds from invoices early and do what they need to do to flourish in their business — meet payroll, pay rent or lease more equipment,” Hagenkord told Inside Towers. “For example, if you’re a net 30 term with one of your customers, we will advance a certain amount of that invoice, then 30 days later, we will get paid back from your customer.”
Kompass serves a couple of boring companies that dig holes for fiber-optic conduits. One company in particular which began in 2021, came to Kompass a month after incorporation for help meeting the upfront costs that it faced to secure payroll and expensive machinery.
“This company had great customers on longer net terms, but had only been in business for a couple of months at the time and couldn’t qualify for a traditional bank loan or credit line,” Hagenkord said. “So, we set up a credit line and began buying their invoices each week and advanced to them the funds that were tied up in the payment process.”
“The business relationship we are building is great for both parties involved,” the boring company’s CEO said. “I truly appreciate the time and effort Ben has put in to help us out. They also have great response times – if I have a question or concern, both Ben and Will respond immediately to help resolve things or find answers for me.”
As its customers grow, so does the money Kompass is able to advance to them. For example, the boring company began with a $500,000 credit line and quickly moved up to a $4 million credit line.
“We pride ourselves on being in consistent communication with our clients, so we are usually in contact a couple times a week,” Hagenkord said. “Whenever they bring on a new customer, or maybe they start work in a completely different industry, we need to be prepared to be timely with the invoices they’re submitting and turn them around quickly so that they can secure the needed capital.”
Factoring, or invoice funding, is not a permanent solution, Hagenkord noted. It can be a stepping stone to permanent financings, such as a bank credit line or self-funding. “We want our customers to achieve their dreams,” he said. “We want to do everything we can to get them to that spot.”
Along with advancing money against receivables, Kompass provides a professional collections team, which stays on top of the debtors to make sure they pay on time. Kompass partners with its customers to help them avoid deficiencies in their internal invoice system.
“When a client outgrows their factoring line, that is a great sign,” Hagenkord said. “That means we did our job, and it indicates they are flourishing as a company.”
That doesn’t mean the relationship ends. There are a number of funding options Kompass can provide for the next step, such as traditional term loans, equity injections, and its Kompass Accelerate program.
“We usually know when our clients need to graduate to a new funding instrument months in advance,” Hagenkord said. “We have a lot of connections in the funding space. We can find a solution that involves a permanent partner, and we can make that introduction for them.”