I visited two small businesses last week and each had a tale of woe. The first told me that his bank had whacked an additional four percent on top of his base-rate-tracking overdraft facility. He argued, lost, and moved his business elsewhere. Another had been promised funding on the grounds that her business was seen as likely to ride out the storm. This was two months ago. She went back to take up the offer to be told that “circumstances had changed.” In short, the bank had got the willies.
Now these two can’t be alone. Both have fundamentally decent businesses. And they’ve both ridden out previous recessions successfully. But if they want to do anything to improve their performance, they’re going to have to dig deep into their personal resources. Unless they can find another source of finance.
Looking around, who’s sitting on shedloads of cash? Successful IT vendors, that’s who. And if you want to improve your business efficiency and top line stuff, what might you invest in? Software and hardware perhaps? Chosen carefully, a system that improves your sales and marketing efforts, for example, could help you find those elusive customers and buck the current economic trends.
Rather a convenient little picture is emerging. No-one knows the potential of IT nor, in the case of hardware, does anyone know residual values better than IT vendors. And, if customers are having a job securing finance, the vendors could be looking at a chilly few months or years. Doesn’t it make sense for them to use their money stashes to lubricate the purchasing wheels of potential customers? It helps them and the customers and the rates are likely to be low because they are better able than bankers and financiers to assess the downside.
“Ah”, I hear you say, “but they’ll only lend it to people who are buying their products.” Turns out that this isn’t entirely true. Some vendors have financial arms – Microsoft and Hewlett Packard spring to mind – and they are willing to finance projects – a mix of hardware, software and services. And it doesn’t all have to come from them. Although you’d be mad not to enlist approved partners to maximise your chance of securing a loan.
Taking the Microsoft example, it does expect to supply at least part of the solution. It uses third parties to determine credit-worthiness and to facilitate the loans. It offers terms between 24 and 60 months, based on the customer’s budget and fixed interest rates. Loans can start as low as £1,000. And you can get your Microsoft authorised supplier to start the ball rolling. Or start at the Microsoft finance site.
If nothing else, such an arrangement helps you preserve cash and credit lines (assuming you have any left) for other purposes.