Distributors Add Resources, Tout Power Of Leasing

The less-than-rosy economic outlook and declining revenue across the high-tech sector have made it difficult for solution providers to secure credit increases to grow their companies. That, combined with the rapid depreciation of most high-tech purchases and the reticence of many companies to approve large capital expenditures, have solution providers looking for creative ways to finance purchases, both for themselves and their customers.

Enter the leasing alternative. Ingram Micro and Tech Data have been at the forefront in touting leasing's advantages and beefing up available resources.

Ingram Micro already has nine leasing lenders and is in negotiations with two more. The distributor also late last month rolled out a new leasing kit to solution providers that includes educational documentation, sales tools and a CD-ROM containing training and proposal-generation tools.

For its part, Tech Data recently added American Express to the third slot in its leasing lineup and plans to drive leasing opportunities into the SMB market.

"The economy has created an environment where leasing is more desired," said Mike Zava, vice president of U.S. credit services at Tech Data. As more companies put the freeze on large capital expenditures, solution providers can quote customers a lower monthly lease payment rather than a sizable one-time payment, he said.

For Norman, Okla.-based solution provider Computer Hardware Services, a Tech Data TechSelect member, the lower monthly payments provided through leasing have helped seal several deals, said Vice President John Gray. The company routinely quotes lease payment information on most of its deals totaling more than $10,000,about 10 percent of its business,and customers will go with the lease about 20 percent of the time.

"We see leasing as a good sales tool," Gray said. "It's easy, and it's a quick turn."

Leasing also can mean more money for solution providers in the long run. Gray recently quoted a customer $20,000 for a solution, but the company found the sum too large and originally wanted to postpone the decision for three months. Instead, the customer went with the leasing option that Computer Hardware Services had included in the proposal. The overall value of the lease was $29,000, which translates into more money for the solution provider.

Leasing also has other advantages for solution providers, particularly those in the SMB market. A lender's approval is based on the customer's credit, so leasing deals don't affect the solution provider's credit line. In addition, leases provide a natural timeline for upgrades and maintenance contracts.

While Ingram Micro and Tech Data both offer expanded leasing opportunities, each distributor approaches the process differently.

Ingram Micro, for example, uses a single application up front, creating a solution provider profile in its systems that the distributor can use in negotiations with its nine leasing partners.

Tech Data has a separate application for each lender: Heller Financial, American Express and the Citigroup-managed OneLease. The distributor acts as a liaison between the solution provider and the lender.

"We don't add leasing vendors lightly," Zava said. "[Leasing is filling a need, and it's gaining a foothold."

With American Express, Tech Data has a full-time lender representative on site. The distributor also plans to expand the relationship in the future to include customized services for solution providers, such as business consulting, small-business loans and unique charge cards, Zava said.