Credit Crunch Hits The Channel

Distributors To VARs: Don't Worry About Credit Lines

Distributors say they have access to ample capital to support solution provider credit lines and their solution provider partners should see little or no impact from the current credit crisis.

Distributors acknowledged that they have received numerous calls from anxious solution providers worried that their credit lines might be impacted by the fiscal crisis. But they 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 Corp., based in 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," Zava 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 not blindsided by an event or by something we had not anticipated."

Kelly Carter, director of credit at Ingram Micro Inc., 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 solution providers.

"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 solution providers 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.

Carter 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 end users and that you understand their financial situation."

In an industry report issued last week titled "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.
--Craig Zarley

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