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17 Mar 2010
Comments:2
Some chief executive officers are still deferring investments, while financial institutions are continuing short haircuts to credit lines. This is a challenge for resellers that depend on selling pricey products or services.
Yet vendor financing need not add unnecessary complexity and delay to sales cycles. As finance packages evolve and those offering them become more aligned with what to offer resellers, more tools are becoming available to increase the efficiency of the sales process, such as online quote and return-on-investment (RoI) calculators.
Resellers should not fear pushing finance as a viable way to pay. For vendors to gain from financing arrangements, it is important to embed financing from the outset as part of the overall solution, not as a separate element that follows the negotiation process.
A financing agreement creates a long-term financial relationship between customer, reseller and financier. Resellers can grow their business and customer satisfaction by servicing a contract. If the customer gets financing elsewhere, the customer may have a relationship with a competitor.
Numerous leasing options exist. For instance, fair market value (FMV) leasing programmes offer aggressive residuals, which can lower the cost of financing to the customer, especially if this is financed out of opex.
This is because the customer can return the equipment at the end of the lease or extend the lease. Any payments required would not show on the balance sheet as they would be tax-deductible operational costs. This represents an upgrade path, raising the prospect of new sales at the end of the lease.
Financing through a technology provider combines finance access with a comprehensive knowledge of the technology sold. Additionally, some finance providers are offering deals such as reseller cash-back offers.
Tim Shockley is director of European sales at Cisco Capital
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Do you agree?
Vendor finance
The real question here is why do IT resellers not lead with finance? Ask any photocopier reseller how they sell and in most cases, they will always quote a cost per month or quarter.
They get the benefit to their business of building a lease portfolio not only in terms of extra margin, secondary income sources etc but also nedless churn/upgrade opportunities.
IT resellers simply are focussed on the product sale and probably need to consider that in many industries consumers are looking at affordable payment options. Look how quickly the car market dried up when cheap finance became scarce in recent times.
Tim Shockley has a point: lead with finance from the outset by simply presenting an affordable periodic rental amount. I think many resellers will be surprised how easy this actually is in reality.
Posted by SV | 06 May 2010
Vendor Finance Matters more than ever
True, but until such time as the Reseller is pushed to promote this and the whole process receives the correct level of marketing, little will happen. Most Resellers do not see this as a function they know much about or feel comfortable selling. It makes no difference telling them it costs them nothing and may open up pipeline business, They do not see it as their role to offer finance and find themselves embarrassed to have to suggest this to their clients
Manufacturers and those in between will need to introduce a financial incentive to encourage interest with full training and support. Take a randon sample of 30 Reseller websites and I doubt more than 20% offer such a service.
Resellers receive all measure of support in other ways, special pricing, volume rebates and varying levels of accreditation. I would suggest the latter should now include the provision of finance offerings and online quoting tools and some initial financial inducement..
Posted by Edward Pacey | 17 Mar 2010
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