Vendor finance matters more than ever

In ongoing tough times, it would pay many resellers to look again at vendor credit programmes, says Tim Shockley

Shockley: Financing from vendors can help cement long-term customer relationships

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