GE Capital, Microsoft Join Forces On New Financing For SLED

"For government -- especially state and local government -- funds are tight. There are a lot of projects they want to go after, and they need financing to fuel the purchasing of Microsoft products," said Jim Kelly, general manager for vendor finance at GE Capital. "We've been in the state-and-local financing business for over 20 years, and we have expertise when it comes to resellers and financing in the VAR channel model."

While the economy is starting to pick up, state and local governments remain tightly constrained. The American Recovery and Reinvestment Act (ARRA) and other Obama Administration programs have promised money to provide IT at the state and local government levels for various projects, but state government administrators continue to wrestle with procurement issues and budget shortfalls.

According to state government watchers like the Center on Budget and Policy Priorities and the National Conference of State Legislatures, as many as 41 U.S. states will end FY 2010 -- which began on July 1, 2009 in most cases -- with new budget gaps and even bigger shortfalls than previously thought.

But that also creates an opportunity for SLED-savvy VARs, Kelly said, to offer demand products and agreeable financing terms to those state and local governments.

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"With procurement dollars tight, financing allows a state and local government entity to get something that is digestible and affordable on a monthly payment basis," he said. "With these crazy times, this offers a lot of lubrication to be able to not only buy more product but get the products they want."

Microsoft's name recognition and cache in SLED made it a good decision for GE Capital, Kelly suggested. The financing program launched last month, and according to Kelly, a number of deals for Microsoft services and software had already been confirmed for financing.

The average transaction size, according to GE Capital, is about $900,000. The program has already seen both large transactions in the $500,000 to $1 million range, and small software package deals for branch offices in local governments.

"The pipeline is pretty robust," Kelly said, noting that demand for Microsoft services and software packages was "across the board" for Microsoft offerings, with no one piece of the Microsoft portfolio standing out so far.

"The availability of credit continues to be more robust than it was a year ago," he said. "Capital availability is not only a major concern for state and local governments but for everybody. Things are better than they have been, and we're lending lots of money to small and medium-sized businesses today, but it's not where it was 18 months ago. People are still anxious to have a financing source provide financing to help them sell product."

At the moment, Kelly said, GE Capital has no plans to extend terms to federal government agencies buying Microsoft products, and declined to elaborate further.