5 Easy Tips For A VAR To Grow Financing Credit

Creating Credit

Building credit and taking on financing can be a daunting task, but in a breakout session at Tech Data's recent Channel Link event at Mohegan Sun in Uncasville, Conn., two of the distributor's credit professionals broke down easy ways for resellers to get started. Jennifer Pezone, credit manager of credit services, and Michael Ward, credit director of credit services, revealed five easy ways to improve credit and secure appropriate financing to build a stronger and more competitive reseller business. Take a look at their tips to get started today.

Share Information

In order to improve access to credit, Pezone recommended full disclosure and open communication, including financials, management, payment history, information from business credit bureaus and more. She said to disclose everything, even if all the information isn't positive, because it gives context to allow creditors to possibly move past negative information.

"If we don’t know about certain changes and we come across them late, it makes it more difficult for us," Pezone said in her presentation. She recommended updating the information quarterly, every six months or at least once a year to make sure it stays current. That includes company website and social media, she said, because creditors often look at those for information, including contact information.

Provide Security

There are many ways that a reseller can improve the security behind a search for financing, including a personal guaranty, cross corporate guaranty, standby letter of credit and a Uniform Commercial Code (UCC) filing. Even if you don't need these documents for financing today, Pezone said that they are good to have on hand for security for yourself and for your customers.

Floor Planning

Floor Planning financing is specifically focused around inventory and allows a reseller to buy inventory with financing and pay the financing back as the inventory is pushed to the customer. This can be a great option for resellers to build credit, especially for smaller resellers looking to take on larger projects for which they may not necessarily have the capital on hand, Pezone said. Some vendors even offer extended days for financing on sponsored projects, she said.

Assignment Of Proceeds (AOP)

Assignment of Proceeds (AOP) allows resellers to use the credit history of their end users to leverage financing for larger project opportunities. The end user would send the funds directly to the financer, such as Tech Data, and then residual proceeds from the sale would be returned to the reseller. Ideal end users for this sort of financing are public Fortune 1000 companies. There is a trade-off with AOP, Pezone said. On one hand, it is a free financing option that is great for larger customers with bigger projects. However, she said she has seen some pushback from customers who don't want to deal with all of the paperwork.

Leasing

Tech Data's Ward joked in the presentation that the conversation around leasing is usually where resellers walk out, because they are scared. However, he said that there is no reason to be afraid of leasing and it actually opens up a lot of opportunities for resellers. It's a great option for companies who are looking to refresh hardware every five years or so, and resellers might even get a kickback from the lease sale. Pezone said that they often see end users coming back again and again for equipment, which means a long-lasting relationship for a reseller.

"You have an opportunity to not only increase revenue for yourself, but through the leasing programs you have an opportunity to increase credit," Ward said.