Distributors to VARs: Don't Worry About Credit Lines

Distributors acknowledged they have received numerous calls from anxious solution providers worried that their credit lines might be impacted by the fiscal crisis. But distributors say they are well capitalized and solution providers will likely be able to dodge fallout from the credit crunch.

Michael Zava, senior vice president of credit and customer services at Tech Data, Clearwater, Fla., characterized the credit climate between the distributor and its solution providers as business as usual. "We have plenty of credit available today and Tech Data has not changed anything in the way we extend credit," he said. "We have not yet seen any negative impact from the credit crunch. But we are more wary and aware and we are certainly keeping our eyes open to make sure we are blindsided by an even or by something we had not anticipated."

Kelly Carter, director of credit at Ingram Micro, Santa Ana, Calif., said that the distributor has no plans to restrict solution provider credit and is in fact proactively increasing credit lines for qualified VARs. "We continue to proactively look at our customers to increase lines. At this point we do not see any change [in credit policy]. It's really business as usual," she said. "For companies that are healthy, there is still plenty of credit out there."

Carter said that one change she has seen recently is that more VARs are helping end user customers finance IT purchases with leases. "We encourage VARs to offer a financing option to their end users if they are struggling closing a deal because the end user doesn't have the funds available," she said.

She noted that leasing allows solution providers to get paid immediately, a strategy that would help mitigate the problem of slow paying customers.

"We are facilitating business as usual and we don't see any changes in that," she said. "The advice we are giving to our resellers is to make sure you know your endusers and that you understand their financial situation."

In an industry report issued last week entitled, "Sizing the Impact of Credit Turmoil on IT Distribution", equity research firm Raymond James & Associates noted that major distributors' credit facilities have ample capacity and are with major lending institutions that don't appear to be at risk. And vendors too say they are willing to step up to the plate to offer more financial support to distributors if necssary. Adrian Jones, HP's vice president and general manager, Americas Solution Partners Organization, said HP is ready to provide more financial support to distributors to bolster solution provider credit lines if the need arises.

The vendor primarily relies on its distribution partners to extend credit to its smaller U.S. solution providers, he noted. HP helps fund those credit lines through its Channel Cap program, which provides capital to its largest distribution partners so that the distributors, in turn, can extend credit to solution providers. "We have been talking with our HP Financial Services people about should we do anything to enhance that to help and support our partners in the market and we are looking at how we can do that," he said. "We haven't done anything to change [the program] at this point but we are not looking at reducing that. We're are looking at how we can enhance that to help our tier two partners."