Computer Reseller News - 05/12/06

As increasing number of channel sales are funded using asset finance, VARs must provide more innovative financing, writes Philip White.

Research recently published in CRN uncovered some interesting if not surprising facts about the number of financed sales in the channel (UK channel sees surge in financed sales deals – CRN 6 Nov). The survey results yielded some newsworthy top line facts and figures, but as with all such research, it is the story behind the numbers that offers the real insight.

The fact that 34 percent of channel sales are funded using asset finance is good. The fact that this figure is set to rise to 41 percent is even better, and indicates increasing demand from customers for resellers to provide finance as a credible business solution, embedded in the sales process. Indeed, in 50 percent of all financed deals, finance has become an integral element ‘from the pre-sales stage.’ However, as acknowledged in the article, ‘two thirds of IT channel sales are not financed, which is a wasted opportunity.’ And it’s not just a wasted opportunity for resellers, it’s a wasted opportunity for those of us in charge of delivering finance solutions as well – and it’s our job to do something about it.

There were several excuses made within the article by various commentators to explain away those cases where finance is not used: a presumption that customers have arranged finance elsewhere; a perception of the leasing industry as complex and riddled with jargon and paperwork; that larger corporate companies don’t need finance and - perhaps most worryingly of all - that ‘finance in the channel has never been that popular.'

Each of these cases points to a rather sad truth: that the finance industry is often failing to arm resellers with the necessary tools and support to make finance a seamless, uncomplicated and unequivocally beneficial part of any sales offering.

The survey discovered that 70 percent of respondents (all of them directors within the UK IT channel) believe that leasing offers ‘great advantage’ to their business. The channel clearly wants to do more with leasing, and can see how it can benefit business, but there is still a lack of confidence when it comes to overcoming the barriers to finance – perceived or otherwise. So what can finance partners do to help? Actually, they can (and should) do quite a lot.

If perceptions of finance as complex or unnecessary for larger companies are genuinely preventing it becoming embedded in the sales process, then the finance industry needs to tackle this head on, both through education and through practical example.

If resellers believe their bigger customers, or those with ample cash in the bank, have no need for finance, they won’t think to offer it. This prevents them from building long term relationships with some of their most significant customers and potentially losing the opportunity for greater financial stability. In fact, finance offers the same business benefits (tax advantages, undisrupted cash flow, cost effectiveness, greater ROI) to all companies – whatever their size – and it’s up to finance companies to help make the case.

It’s difficult to know what the channel will have made of these survey results: as much as they highlight the current shortfall in finance and leasing they offer little in the way of a solution. Do they encourage greater use of finance or bring clarity to the issue? I don’t necessarily think so. But they do give a clear message to the finance industry: improvements have been made, but more needs to be done.

VARs need more support to achieve the real business benefits that finance can offer. And flexible, innovative, straightforward solutions should be available from all providers, not just a select few.