Wells Fargo Makes Channel Financing Push

Financial services giant Wells Fargo is looking to take its channel financing business to the next level this year.

Wells Fargo this week signed its second major vendor partnership for channel financing this month, forming a pact with AT&T around its Partner Exchange Program to provide 60 days of interest-free financing for AT&T partners. Earlier this month, Wells Fargo partnered with Dell for a similar financing program for Dell resellers. This new partnership further demonstrates the San Francisco-based company's larger coordinated focus on the channel and the tech sector, said Steven Hopkins, division manager of direct supply chain at Wells Fargo.

"We are looking at solutions to enable sales growth, working capital and risk mitigation in the channel," said Hopkins. "If you look at cloud, managed services, a lot of resellers are struggling with financing and from an AT&T standpoint they are looking to make it easier to bundle services and go to market and we are helping to provide the liquidity to partners."

[Related: Dell Brings Financial Incentives To Channel Partners With GE Capital, Wells Fargo​ ]

Similar to the channel financing program for Dell, AT&T telecom services resellers will also have the 60-day term, larger lines of credit and other incentives, said Hopkins.

"There aren’t a lot of differences in the new program, it's just the different space and different resellers we're reaching out to," said Hopkins. "The only difference here is the hosting services that get pushed into this mix of business. It's the technology and tools that drive to help the reseller."

For the past four years, Greensboro, NC-based Varrow has been getting its channel financing from Wells Fargo. The financial institution has been accommodating the mobility, cloud and security-focused solution provider with a stabilized and centralized cash flow and purchase process, said Daniel Weiss, COO of Varrow.

"Instead of getting multiple invoices from multiple vendors, we have 98 percent of our purchasing through Wells Fargo," said Weiss. "In the past we had challenges around rapid growth and making sure to have enough credit to do business. Working with Wells Fargo is good for business growth because it allows a predictable cash flow to tie our investments back into the business."

NEXT: Wells Fargo's History of Acquiring A Channel Financing Division

The Supply Chain Finance team at Wells Fargo Capital Finance was first created in 2012 after the company had purchased Castle Pines Capital back in July 2011. Founded in 2004, Castle Pines had focused solely on channel financing programs. Over the past two years Wells Fargo has grown since the acquisition to include more financing options, said Hopkins.

"We are not just their channel financing provider, we're also their bank," said Hopkins.

The Supply Chain Finance team's experience and understanding of the channel benefits resellers like Varrow, said Weiss.

"They are not just bankers," said Weiss. "[Wells Fargo] understands the challenges of the solution provider and it's great to have somebody that came from my industry to understand the challenges of the industry.

With the acquisition, Wells Fargo would be filling a void by providing channel financing options, said Hopkins.

"From the economy standpoint, we went through different changes from 2007 and on, and it made vendors realize terms were important," said Hopkins. "Liquidity wasn’t good as banks weren’t lending and the SMB space was tougher, but we didn’t change our principles."

Currently, Wells Fargo's reseller customers are looking at different avenues for the recurring revenue and are adjusting to managed and cloud services, said Hopkins.

"If we look at our typical reseller base they are selling to enterprises or the government, which are down and looking to save money," said Hopkins. "Resellers need to be smarter in terms of packaging solutions to return the same level of profitability."

While many solution providers are shifting more to consulting, cloud and managed services and selling less hardware and software products, they still need financing support, Hopkins said.

"Some are making healthy margin on equipment and some aren't," said Hopkins. "Wells Fargo is indifferent whether it's a SaaS purchase or hardware, it's dependent on the risk level of reseller and how good their receivers are. So as the mix continues to change, we are conscious and aware of it."

Following its partnerships with Dell, which specializes in hardware, and, AT&T, whose core business is telecom services, Wells Fargo will continue to dive into other IT market segments, said Hopkins.

"We will be across the board and focus on networking, software, more services and storage," said Hopkins. "We will continue to look at our resellers, who their vendor partners are and have a good impression of where they are moving to next."