Flexible financing can fund the future

There is so much pressure on the channel today that a new approach to financing is vital to achieve growth, claims Tim Clements

How can (and why should) computer resellers look for alternative ways to help fund their business?

Businesses today realise that in a world of intensifying competition and ongoing commoditisation, innovation is the most effective way to create sustainable competitive advantage and differentiation. That is as true for the chief executives of large multinationals as it is for the leaders of today’s computer resellers.

As we emerge from one of the longest slow-to-no-growth economic periods in recent memory, decision makers are confronted with new global competitive threats, such as the removal of geographic trade barriers and the rise of new economic powers such as China. Those new forces drive a need for growth, which is a major reason why decision makers are pursuing productivity strategies to address such competitive pressures.

This question of how to fund growth while improving productivity should be the top priority of today’s resellers.

The right financing partner can take the pressure off the business by ensuring that suppliers get paid when they want and at the same time providing enough flexibility to respond to changes in the firm’s cash flow requirements, as well as helping those companies keep up with market demands.

Traditional bank lending, while reliable, is often unable to provide the necessary flexibility. Traditional financiers do not always understand the needs of a reseller who has to satisfy the demands of suppliers and customers simultaneously. To overcome this, resellers should look for an innovative financing partner, one that understands their business and has a proven track record.

Inventory financing programmes can work well for resellers, as they can be used to pay any supplier that has signed an agreement to participate in the programme. This means resellers can choose their suppliers based on their products, prices and service, rather than on the credit availability they offer. Supplier’s invoices will get paid when they want, but the reseller pays on a pre-determined date that suits them. This gives the flexibility to structure terms that fit the VAR’s cash flow, instead of having to meet a supplier’s invoice terms. Freeing up working capital like this not only helps preserve credit lines, but also enables the reseller to concentrate efforts on new sales opportunities.

As an alternative to bank loans and overdrafts, VARs should also consider the use of an accounts receivable facility that can be used in conjunction with an inventory financing programme. By borrowing against the value of the business’ debtor book, working capital can be freed up allowing the business to grow at a faster rate.

Using a specialist financier with specific industry knowledge can result in a higher value being placed on the company’s assets, which in turn can unlock additional cash and credit from the balance sheet. As the business grows, so does the debtor book and with it the borrowing facility to allow the company to expand as it needs.

Working with a financier that has the expertise, industry knowledge and the resources necessary to support the VAR’s financial requirements can provide tremendous value by taking away the financial pressures and leaving the reseller free to concentrate on finding areas of growth. Businesses are constantly innovating and changing in response to customer needs and competitive pressure. Meeting funding requirements are key to making real change a reality, keeping up with competitive pressures and achieving long-term success.