Tuesday, February 26, 2008

Financing for Faith Based Broadcasters

With the National Religious Broadcasters convention and trade show in Nashville March 8th to 11th I thought it would be timely to discuss technology financing alternatives for this segment of the broadcasting community. Religious broadcasters often combine traditional advertising revenue, especially local ad revenue, with a mix of contributions and donations from members of their respective worshiper communities. Larger broadcasters may cull support from national and even international members, worshipers and contributors. The technology transition to digital and HD as well as the need to upgrade to modern billing systems, station automation, camera systems and HD radio broadcast for both TV and Radio broadcasters may create the need for financing that supports or aligns with a specific broadcaster's revenue generation method. For instance religious broadcasters with a steady donor base may find that short term, low-cost, financing which allows for prepayment at any time is most cost effective. Other broadcasters find that the ability to spread the cost of technology over months or even years......aligns with their revenue, donor and contributor timeline. As a "non-profit" religious broadcasters often must balance the need for financial stability against the mission to fully fund programing. Again, financing, properly utilized may be an effective tool to help manage technology costs and growth initiatives.

Sunday, February 10, 2008

Debt vs. Equity

The saying goes that "debt is almost always cheaper than equity". Equity is the ownership by yourself or others in your Broadcast enterprise. In most cases Equity is traded for investment. However equity is expensive IF your broadcast enterprise is growing in value or expected to do so.

Debt is an investment in the enterprise usually without giving up equity. On the surface Debt may seem more expensive than equity yet it is rarely so. The investment of cash or capital in broadcast equipment is a use of equity since it dillutes equity. In cases where cash is used, vs. debt, the cost of financing (using ones own cash) represents a loss of investment return (ROI) that the organization would have received on its own capital. Financial managers must ask themselves: "If my enterprise can attain a 10% return on its capital, and obtain financing at 6%,why not leverage debt in acquiring depreciating assets and retain our own capital for investments that appreciate such as organizational growth, projects, acquisitions, people, advertising, etc.