The Advantages of Equity Funding

A large majority of internet service providers seeking BEAD grants will be financing matching funds using loans. Matching funds are the contributions expected from providers—a 75 percent grant means 25 percent in matching funds. Very few providers carry enough cash on hand to consider using equity to pay for broadband expansion. This contrasts significantly with large telephone and cable companies that will be pursuing BEAD grants, most of whom will finance grants using equity. When it comes to financing using equity vs using loans, equity is the clear winner for the provider. A provider that uses debt to finance its matching funds will take many years to break even, while a provider that uses equity will save millions on debt payments and accumulate far more cash. Moreover, a provider using equity can win the BEAD grant by accepting less than a 75 percent grant. A provider using loans, on the other hand, would lose money every year if it accepted less than a 75 percent grant. This gives the large providers another leg up in the BEAD process.