As a service to their Channel and to their Channel`s customers, Westcon South Africa recently negotiated a joint venture with Paradigm Finance to provide the most cost-effective and tax-efficient IT-finance model currently available in South Africa. The new venture, known as Software Rental International (SRI) will provide funding in an area that is notoriously difficult to finance through conventional channels.
"We recognised that there is a serious gap in the marketplace for an alternative to traditional finance methods, especially in the area of IT financing," comments Jeff Solomon, head of Strategic Planning at Westcon SA. "Banks have always been reticent when it comes to providing finance for computer hardware and they generally balk completely when it comes to financing software or other intellectual property."
Solomon continues, "Of course, there are other finance options available. However, their interest rates are usually completely prohibitive. And yet, installing a modern computer network may be of such strategic importance to a business today that they may not survive without it. Since IT financing can often run into millions of rand - far more than the average SME is able to pay from its own funds without crippling its cash flow - this creates an impasse for the customer and for our VARs.
"To solve our channel`s dilemma, and to enable them to provide a tremendous value-add to their customers, SRI has developed a rental finance model that eliminates most of the bureaucratic red-tape and speeds up the financing process. It offers many substantial benefits to the customer, especially when compared with paying cash, borrowing from overdraft, instalment sale or financial leasing," adds Solomon.
Some of the immediate benefits SRI`s rental option offers to the customer are:
In a rental financing option, the customer only pays for the use of the equipment rather than for the equipment itself, resulting in a lower monthly outlay
No Capex approval is required, which can speed up the buying decision significantly
Rentals are treated as an operating expense and are calculated off balance sheet
There is no outflow of cash, so the customer`s cash flow is not placed in jeopardy
Rentals are fully tax deductible
Rentals do not disclose the purchase price
The customer`s client base remains strictly confidential to the client and so is amply protected
Equipment can be upgraded at any time during the contract period, so upgrades can easily be planned for
SRI has introduced a system of "Upgrade Credits" that allows the customer to upgrade part or all of his or her existing equipment without any increase in their current rental.
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