No Credit Crunch in the ChannelBy Jessica Davis | Print
Solution providers looking to close deals and get paid upfront from cash-strapped customers should turn to financing and credit options. Despite the Wall Street meltdown, plenty of money still circulates in the channel credit system.
On the morning of Sept. 26, Americans woke to the news that Washington Mutual, the nation’s largest savings and loan, had failed under the weight of $31 billion in bad debt. It was the latest, as of this writing, of a string of disasters plaguing Wall Street and threatening the entire global financial system.
The impact of these Wall Street woes on corporations and consumers alike is a constricting of credit, the lifeblood of the global economy. If there is no cash in the system, banks and lenders can’t extend credit to purchase goods and services. It’s the very reason why the government is contemplating a $700 billion bailout plan.
Credit, however, isn’t hitting the channel as hard as it is homeowners and industrialists. A recent survey by Channel Insider found that nearly 80 percent of solution providers are having about the same or better access to credit than they did in 2007 and that credit is easier to come by today than it was three years ago.
Even with the walls of the financial world tumbling down, one in three solution providers say that the availability of credit will improve in the coming year.
"So far there is no evidence of a lack of capital," says IDC's Joe Pucciarelli, program director for the market research firm's Technology Financing & Management Strategies practice. In fact, Pucciarelli is among a group of analysts who predict that the financial services crisis could spur technology spending in other sectors.
All of this is good news for solution providers and resellers, who don’t necessarily borrow money to fulfill deals but do help their customers gain access to loans and lines of credit so they can make product purchases. Oftentimes, the availability of credit is dependent upon the customer’s credit rating and banking relationships.
"There are companies that have maintained excellent banking relationships," says Pucciarelli. "They have reservoirs of credit if they need it. There are small companies that have done nothing. It's not a function of size. It's a function of the attention the companies have paid during the good times to ensure they have adequate contingent resources – those resellers who were prescient enough to recognize the benefit of it."