Distributors Bet On Financing

For example, this week D&H Distributing rolls out its most comprehensive financing program ever, comprised of a credit account plan, leasing option and flooring plan. Meanwhile, other distributors continue to refine and develop creative financing programs to help solution providers grow their business.

“Distributors truly add a value that you can’t get anywhere else in the marketplace. We’re always looking for ways to help customers maximize their margins, such as good, valuable financing programs. I don’t see another vehicle in the channel to provide that service,” said Joe Chaudoin, director of credit and financial services at D&H, Harrisburg, Pa.

D&H partnered with De Lage Landen Financial Services, Wayne, Pa., on its Flex Credit program, which offers 45-day interest-free terms up to $25,000 to solution providers that previously paid by credit card. D&H estimates that 3,000 solution providers will sign up and that purchases through the program will reach $10 million per month.

The Flex Credit program is targeted at VARs like KPM Computer Solutions, which spends more than $1 million each year via credit card with D&H, said Kevin McClung, owner of the Winfield, Kan., solution provider.

“We tried to get net terms and tried and tried and tried, but we were never able to get it,” McClung said. “D&H said we were their biggest credit card customer in the U.S. We’ve maxed out a Discover card three or four times a week and pay it three or four times a week.”

KPM will continue using credit cards, but McClung plans to use the Flex Credit program for larger projects that he would have had difficulty financing before.

Financing programs need to evolve as the channel evolves, said Mike Zava, senior vice president of credit and customer services, the Americas, at Tech Data, Clearwater, Fla. For example, Tech Data is developing a program based on the needs of MSPs.

“Those customers don’t want a lease for servers and desktops, then supplies for printers, then break-fix stuff and specialty work all on different bills. We want to find something that simplifies the back-office administration for the reseller and makes the end user want to use that,” Zava said.

Distributors’ financing programs are often much easier to navigate and do not include as many restrictions as vendor and third-party programs, said David Omlor, CEO of QLAN, a Laguna Hills, Calif., solution provider that relies on Ingram Micro as its financing partner.

Ingram Micro, Santa Ana, Calif., has only turned down one of his leasing proposals in the past four years, he said. In some cases, he includes products procured from other distributors in the lease.

“I suspect they wouldn’t lease something that had no Ingram content at all, but it can be any mix. They have a great quoting tool that I export into an Excel spreadsheet,” Omlor said. “You might be able to get an extra .004 points from someone else, but that’s not a big issue right now. Ease and rapidity of getting leases approved and the flexibility of the programs are the key drivers,” Omlor said.

And that’s where distributors’ financing has a leg up on other lending agencies, he said.

Several distribution executives said leasing accounts for only a small percentage of the total credit they offer, but the number is growing at a good clip and the need for creative solutions also is increasing.

ScanSource, a Greenville, S.C., distributor, has partnered with Smoky Mountain Funding on a leasing initiative for end users that do not have great credit. The Second Chance program lets solution providers service customers while not assuming any credit risk themselves, said Tim Ramsey, vice president of Reseller Financial Services at ScanSource. “All of a sudden there’s a source of funding for them to free up [capital] for their best interests,” Ramsey said.

David Atkins, account executive at GEE Communications, a Lansing, Mich., solution provider, hasn’t had any customers use the Second Chance program yet, but Atkins likes to have the option in his solutions toolbelt.

“We do work from time to time with companies without perfect credit. They’re not bad people and they have a great business, a great idea and they need proper equipment,” Atkins said. “This is another chance to get funding. I believe in second chances.”