The Credit Crunch: Has Financing Returned?

After the cataclysmic bankruptcy of Lehman Brothers and subsequent Wall Street collapse in late 2008, credit dried up faster than chardonnay at a Tupperware party. Solution providers were forced to hunt for alternative financing sources as business loans disappeared and frightened banks froze or eliminated credit lines. 2009 was a painful year for many in the channel because of the credit crunch; capital was scarce both for solution providers eager to grow their business and the solution providers struggling to stay afloat.

That was last year. What about now? Is the credit crunch over?

Solution providers say the economy turned a corner this year in at least one regard: Credit began to open up again late last year, and now many VARs say it's much easier to secure a loan or line of credit and banks are now courting customers. "The banks are throwing credit at us now," said Audrey Levi of Altek Computer Group in Miami. "We've had three major banks calling us and offering us credit."

Steve Alexander, president of Third Eye Technologies in Nanuet, N.Y., agreed and stated the credit crunch is over. "If you're well managed, then you can get the money now," Alexander said. Banks will certainly scrutinize prospective borrowers, but the endemic reluctance to lend money that suffocated credit lines a year ago has been cured -- at least for the time being.

"There's more stress around credit right now, but we haven't seen any material changes to the way our financing partners are operating," said Pete Peterson, Tech Data's senior vice president of U.S. sales. Peterson added that Tech Data's third-party finance partners like GE Capital and Hewlett-Packard have introduced special floor planning and leasing options for SMB-focused resellers. "We know our customers need financing options," he said, "and certainly haven't made any changes to the way we do business, and neither have our partners like GE."

But with unemployment still high and fears of a double-dip recession beginning to creep in, some VARs are getting worried. "The SMB market is getting better this year," said Todd Croteau, CEO of All Covered. "But in a normal economy, we'd see more companies increasing their services with us because they'd be growing and hiring more people. But we're still nowhere near the normal services level because businesses are still fearful of what's to come."