Cisco Capital Slates $2B in Financing for Channel Partners in Emerging Markets

Cisco Capital has expanded its short-term inventory financing for emerging regions to $2 billion through agreements with financial partners Citibank, General Electric’s GE Capital Solutions and Standard Chartered Bank.

The new funds will offer short-term financing to Cisco channel partners in the Middle East, Africa, Latin America, Russia and the Commonwealth of Independent states, and Central and Eastern Europe, said the networking vendor, based in San Jose, Calif.

According to David Rogan, president of Cisco Systems Capital, the new funds extend the time for channel partners to repay Cisco from 30 days to 60 or 90 days.

“In some cases it took 30 or more days just for the equipment to get through customs and to the end users,” he said. “And in some of these emerging countries there is not a significant amount of capital or liquidity, and that constraint ended up constraining our growth rate as well.”

Sales to emerging markets are crucial to Cisco’s overall growth, Rogan said. In fact, some of the emerging market countries are expected to become billion-dollar markets for Cisco in the next three years. These regions are investing in initial infrastructure build-out, and Cisco said sales in these markets have grown 40 percent year over year.

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Cisco hopes the new financing will give it a competitive edge in those emerging countries where money is tight. Rogan admitted that pricing is likely one of the issues in those markets, and pointed to Cisco’s leasing program that offers customers the option to put equipment on a payment program.

Rogan said that the $2 billion is not a top limit: Cisco plans to continue to expand the program, both financially and geographically. Other regions the company is looking at include Vietnam, the Philippines and Indonesia. In addition, Rogan said Cisco plans to expand further into China and India.

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Cisco’s $2 billion in new financing is partially made possible by the $500 million short-term growth capital fund Cisco announced in 2005.

Over the last year Cisco has added seven specialty distributors focused on expanding regional coverage in emerging markets and has increased its base of channel partners in those regions by about 20 percent.

In total, Cisco Capital has nearly $10 billion in third-party inventory financing capability today, the company said.