Why Vendor Financing is Key in the Technology Sector

Whether you are a supplier or a customer in the technology sector, you know that technology of all types is expensive – and isn’t getting cheaper. At the same time, it’s more important than ever to keep up with advances to remain competitive, to grow and to thrive.

Enter vendor financing.

An effective strategy for technology OEMs, distributors and VARs, vendor financing programs enable those companies to provide financing to their customers. In the technology industry, vendor financing programs are available to help customers make purchases of hardware and software, and applications like networking, data security, cloud storage and data connectivity.

Vendor financing program options

Sometimes called “vendor credit” or “trade credit” for information technology (IT), vendor financing can take the form of a loan, but today, innovative financing partners can develop tailored solutions as well. These can include:

• Tech equipment leasing. When continually purchasing new equipment and systems is not feasible, leasing gives companies the ability to keep up with advances in technology. And, beyond the ability to acquire products or services when they need them, they gain flexibility. At the end of a lease term, they can return or upgrade the equipment. Sometimes, they may opt to buy equipment outright. For the customer, it means better cash flow management and ability to stay up to date. For the technology OEM, distributor or VAR, it means developing and strengthening the customer relationship.

• As-a-service financing. As-a-service financing involves offering a product or service on a subscription basis. A variety of options include service contracts and assignment programs, in which an OEM or other vendor receives cash upfront for the payment stream coming its way with the as-a-service contracts it has established with its customers.

  The as-a-service model can be beneficial for businesses that must maintain up-to-date technology. For them, purchasing new equipment and systems on a frequent – often ongoing – basis can be cost-prohibitive. As-a-service financing allows them to obtain the latest technology, when they need it, on a subscription basis, and thereby reduce up-front cash outlays.

  As-a-service financing can extend to end users, too. For the OEM, distributor or VAR, selling on a subscription basis can help maintain or increase cash flow. Effectively selling via a monthly payment, as-a-service financing can provide a competitive edge and create a recurring customer. It can also help cash flow by reducing or eliminating the need to discount equipment when selling on a traditional-purchase basis. OEMs, distributors and VARs can use the recurring revenue to pursue growth initiatives.  

• Private-label financing. Private-label financing – also referred to as white-label, financing – involves a financing provider offering financing to an IT company’s end-user customers under the IT company’s name. The program operates as an extension of the tech company’s business, making financing direct and simple for end users while easing logistics and staffing concerns for the technology provider. 

Benefits for OEMs, distributors, VARs

Vendor financing programs offer benefits to both technology providers and their customers. For providers, vendor financing can open up new channels of revenue. It also provides an ongoing, steady stream of cash, easing ebbs, flows and any seasonality in the business. That gives OEMs, distributors and VATs more cash to invest in new opportunities and grow their businesses.

Creating and implementing individualized vendor financing programs helps customers purchase and upgrade equipment and systems more affordably and efficiently. By helping customers provide financing to end users, technology providers are helping them work better and more effectively. In as-a-service relationships, programs offer opportunities to work with customers more frequently and on a long-term basis.

Choosing a vendor financing partner

The most effective vendor financing programs are those tailored to individual businesses. Finding a financing provider that adopts this approach will smooth operations and improve outcomes. A strong financing partner will help develop, set up and execute programs, and one with expertise and experience in the industry will be able to do so more effectively and faster. 

Tailored solutions result in a win-win for both technology providers and their customers. Both can increase revenue and benefit from a commitment to each other’s success.

Mitsubishi HC Capital America develops strategic, customized financing solutions that help clients throughout North America generate long-term growth and achieve sustainability goals. With strong background and expertise in technology, we work to develop comprehensive vendor financing programs that produce results. To learn more about accelerating growth through vendor financing programs in your business, contact us.