Make IT Credit-able

A fairly well-known SMB in

the NCR region was recently looking to take on lease 50 odd laptops. My

friend, the IT manager,

was lamenting that while the leasing company had initially agreed to

the deal, at the 11th hour it suddenly bailed out citing that the

company's credit rating as the problem. They will be willing to go

ahead if the bank stands as the guarantor and is willing to

underwrite costs. Why I brought this story up is because it is the

typical scenario facing several SMBs as well as partners who often

lease out or supply hardware to these companies. Working capital and

credit flows are the biggest problems and there seems to be little

room for maneuvering. It's a Catch 22 situation as otherwise

businesses on both sides would come to a standstill. So what could be

the solution?

One could be Non-Banking

Financial Corporations (NBFCs) which are helping partners, suppliers

and SMB users by providing

them easy financing schemes. Redington owns one such NBFC which,

however , functions

as a neutral channel financing company. Banks like ICICI offer softer

loans or easy finance schemes under various SMB programs. Both the

user organizations as well as suppliers/partners (who

too will come under SMBs) can avail of these facilities. The banks

could also look at restructuring their loan EMIs or at least

rationalizing them considering that many of the SMBs are still to

find their feet as they come out of the recession mode. However, it

is imperative for the partners/SMBs to come clean with the

banks/financial institutions they are dealing with. Any request for

loan restructure revision should take into account their true current

fiscal situation as well as a fairly accurate assessment of the

future cash-fl ow position. There are talks of RBI stimulating the

SMB sector but even if that happens our partners, and SMBs in

general, have to maintain a certain

standard of fiscal hygiene. Often vendors could offer extended

financing terms to SMB resellers. These programs offer eligible

resellers period-based interest free credit by extending indirect

financing through their distributors-often a joint approach between

a vendor and a financing company,

this could be a godsend not only for maintaining the working capitals

but even to successfully enable hardware acquisitions. The subsidies

thus offered to both the reseller as well as the user not only allays

their immediate woes but also stimulates business growth for both, as

well as driving incremental sales revenue for the vendors.

What we really need is a

happy marriage between the partner credit programs and end user

leasing programs. That way the

working capital problem is successfully tackled, and my friend the IT

manager can get a good night's sleep.