Despite the ongoing economic uncertainty, businesses have a genuine appetite for IT investment but remain reluctant to use any cash balances they might have to fund such an investment.
That was the underlying message we derived from our annual reseller survey this year, which tapped into the experiences of IT vendors and distributors, asking decision makers and point-of-sale contacts what they wanted from a finance provider.
While the overall investment in IT by UK businesses fell at the start of the year, down 10 per cent to £3.5bn in Q1 2012, leasing agreements for IT equipment jumped 18 per cent to £283m in Q1 2012.
This is up from the previous quarter, suggesting a demand for investment in IT if finance can be made available. On this basis, we wanted to ascertain where resellers most often require funding.
We asked 4,000 UK resellers eight questions aimed at establishing their views on finance in the sales process and the type of new technology that interests them, as well as how often they are in the market for new tech.
The sample included our reseller and non-reseller partners, across different job functions, including account manager, director and finance controller. We believe that our survey produced a number of useful and insightful results.
Traditionally, a small business looking to fund a major IT purchase would turn to its bank for a loan. But banks have been far less willing to extend credit to small businesses since the recession began.
This has given rise to alternative funding options such as leasing.
Some 56 per cent of IT vendors who responded to our poll suggested they view the provision of finance as core to their sales offering.
A small business can benefit from using leases to acquire a long-term asset such as IT or machinery. Leasing does not weaken the balance sheet of the borrower and adds assurance for the customer, because lease funding cannot be withdrawn at the whim of the lender.
If the borrower runs into difficulties, the funder that organises the lease will have security over the asset. This should mean they can lend at a more competitive rate than if the lending were unsecured.
Thirty-three per cent of IT vendor respondents in our survey said they now offer finance whenever a potential customer objects to the cost of the IT on offer. The past four years have seen a consensus emerging among IT vendors as offering customers the finance to make IT purchases has become essential to completing sales.
In some cases, respondents said that if they do not help their customers arrange finance, there will be no sale.
Online finance quoting systems can prove popular and in fact our reseller partners have told us they want this. Such systems can allow resellers to identify a customer's finance status at a glance, offering them a financial decision in principle in seconds rather than days or weeks.
In our survey, 58 per cent of IT vendors who responded said a mechanism that quotes them the price of finance for their customers is the most valuable feature of an online vendor finance system. Fourteen per cent said providing a credit opinion on a customer would be the most valuable feature.
Eighty-one per cent of respondents said they would welcome a mobile app that offered this kind of service as well as indicative lease costs and quotes. They also indicated preferences for having a cost comparison for cash versus leasing, a rewards scheme for suppliers, and the ability to send financial documents such as quotes directly to the customer.
We have signed up so many new resellers simply because there is a huge demand for vendor finance. And the Finance & Leasing Association (FLA) believes there has been a 16 per cent increase in the year to March 2012 in the volume of vendor finance deals its members fund, from £4.8bn to £5.5bn.
Last year, the FLA said the amount of money provided for vendor finance rose 24 per cent in the six months to the end of July 2011 to £2.6bn.
It seems it may be time for vendor financing to push further towards the mainstream and become a standard business financing tool.
Philip White is chief executive at Syscap
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