Financing
The Financing Options
Financing and Business models for Local LTE
The costs related to deploying any kind of private local network should never be underestimated and such an initiative needs to be carefully planned, both financially and otherwise. That being said, this doesn’t have to be a burden you carry all on your own. There are many financing options available in the market that could negate the upfront costs significantly or at least allow for a more reasonable spread of the costs over time.
Whether the site owner chooses to lower the burden of the upfront costs or perhaps seeks to recover the investment with business models to monetize the network once built, there are ample options available to address the financial impact.
How Local LTE can be financed to reduce the burden
Bank loans:
A company can take out a loan from a bank to finance the rollout of its corporate private network. This option typically requires the company to have a good credit history and collateral to secure the loan, but otherwise banks will consider such an initiative a good investment with low row risk.
Venture capital:
If the company is a startup or spins off the connectivity initiative from its core business, it can seek financing from venture capitalists who are interested in investing in innovative technology projects. Venture capitalists may provide the company with the necessary funding to build and deploy the corporate private network in exchange for equity in the company. Giving up equity in the company to investors in exchange for financing means the company will have to share control and profits with those investors. Do note that this can lead to conflicts of interest and a loss of autonomy for the company.
Government grants:
Depending on the nature of the corporate private network project, a company may be eligible for government grants to support the development and deployment of the network. Keep a close eye on government support for Internet of Things initiatives and grants for private networks should come by every now and then at least. Grants do often come with strings attached, such as requirements to meet specific performance metrics or to use the funds in a certain way. If the company is unable to meet these requirements, it may have to repay the grant money or face other penalties.
Equipment leasing:
A company can lease the necessary equipment for a leasing company instead of purchasing it outright. This can help the company conserve its cash resources while still being able to deploy the network. This has enough win-win elements to the proposition to make both sides of the partnership happy. Leasing equipment can be more expensive in the long run than purchasing it outright, as the company will be paying interest on the leased equipment.
Crowdfunding:
A company that is rolling out its private network for a significant number of users, such as a university campus e.g., can consider crowdfunding platforms to raise funds for its corporate private network. Crowdfunding allows the company to solicit small investments from a large number of individuals, often in exchange for perks or rewards. While crowdfunding can be an effective way to raise capital, it can also be time-consuming and resource-intensive. Additionally, if the crowdfunding campaign is unsuccessful, the company may have to start from scratch and pursue alternative financing options.
Self-funding:
A company can choose to fund the rollout of its corporate private network from its own cash reserves or profits. This can be a good option if the company has a strong financial position and does not want to take on any additional debt. This makes the most sense if Internet of Things applications are the network’s primary objective.