Gap Widens Between Customer Financing Needs, VAR Capabilities

In a survey, 11 percent of solution providers with an average of 1,000 employees reported that they do not have access to capital to continue "business as usual," according to IDC.

For smaller resellers, with less than $5 million in revenue, the figure jumps to 20 percent that have inadequate access to capital.

"IDC believes that beyond a reseller's human capital, access to financial capital and credit are the second most important business resources; therefore, understanding the real-time risks and opportunities confronting these critical segments of the IT solution chain will be an important bellwether for the entire IT industry," said Joseph Pucciarelli, program director of Technology Financing and Management Strategies at IDC, in a statement. "The captive financing units for the major IT vendors have worked for many years to develop and deliver financing solutions to their solution providers. These latest research findings suggest significant gaps remain."

Several VARBusiness 500 solution providers said they were not surprised by the survey results, as working capital and financing have become more important factors in business these days.

"There's no question it's an issue. We run into it, whether it's credit facilities from distributors or manufacturers, or trying to get leasing done either for our own business or in place to a customer. It's tight all the way around," said Tom Sweeney, chairman and CEO of Incentra Solutions, Boulder, Colo., No. 224 on last year's VAR 500 list with $145.7 million in 2007 revenue. "I wish I had something to share to [eliminate] the issue, but you just have to beat your way through each opportunity as it comes up."

Jon Jensen, CEO of Nexus IS, Valencia, Calif., No. 230 on last year's VAR 500 with $140.1 million in 2007 revenue, said capital has not been a problem for his company as his line through Cisco Capital has increased from nothing five years ago to $45 million today.

"That allows us not only to finance Cisco purchases, but it also allows us to borrow for working capital. That's a big plus," Jensen said.

Also in the survey, 64 percent of large VARs, with 1,000 or more employees, reported that their customers have more interest in IT financing and leasing programs than six months ago, according to a recent IDC survey.

Nexus IS sees more customers look at leasing scenarios, too, Jensen said.

"They want to have the capital spend removed from their budgets," he said. "If we work with customers to show them creative ways to still implement technology and get around those budget constraints, that's a win-win for both. We're selling solutions that provide a legitimate ROI. If we can prove that out on the front end and provide a way of paying for that solution over time, the actual net cash-flow impact to the customer can be very positive."

Mark Metz, CEO of Canvas Systems, Norcross, Ga., said his company, No. 237 on the VAR 500 with $130.5 million in 2007 revenue, has been somewhat immune to the macroeconomic issues, though access capital is an issue.

"It hasn't affected our business yet. It's a little luck, and a little that we've accumulated enough profits over the last few years that we've got the internal capital to continue to invest, instead of having to go to outside sources," Metz said. "Even our bank is telling us we're being too conservative. We've been very conservative for years; fortunately that finally paid off."