IT Business Finance. We’re talking about ‘information technology’ financing of course. There’s a lot of concern by Canadian business owners and financial managers around the fact that if companies want to grow and stay competitive that requires a lot of capital these days. The right type of financing helps business owners cope with a technology change nightmare . Experts state that the actual risk of acquiring and owning tech assets is simply the time factor – going from valuable to ‘ economically useless’ in zero to sixty!
Many Canadian businesses view their acquisition of technology almost as a battle, and we’re quite sure they are never really figure out if they are winning or losing!
So is the solution to give up? Hardly, in fact a lot of traditional straight forward financing solutions can handle a lot of the economics and issues around IT finance. Naturally that involves computer hardware, software, services, telecom assets, and on it goes.
One of the reasons Canadian business owners and their mgmt teams wrestle with financing tech assets revolves around their belief that these assets both operate differently than other business assets, and in some cases, i.e. software, are even intangible .
What are some of the assets that are being financed these days when it comes to equipment leases and loans? It’s a wide array, including pc’s, cell phones, severs, POS systems, and even all the underbelly of the internet – the guts so to speak !.. I.e. routers, switches modems, etc. One more thing – even software licenses can be financed.
One of the big fallacies out there is that software can’t be financed. It can, simple as that. We’re talking predominantly application software though, not the actual development.
Medium sized and larger corporations tend to have a plan or overall strategy when it comes to IT business finance. Finance terms typically range from 2-5 years, and companies opt for the traditional capital lease or in many cases a more sophisticated version of the tech lease, the ‘operating lease.’
While many lease and finance companies in Canada are prepared to finance tech assets the Canadian borrower should in no way assume that it’s always based on the strength quality and need of the assets themselves. What we mean by that is simply that your firm’s actual cash flow and overall financial condition still play a key role in the overall financing approval. In fact the case could be made that many banks, lessors, and other commercial lenders in Canada, while financing technology, still feel strongly that these assets still come with a high obsolescence factor.
Sophisticated lenders and captive finance firms in the tech industry place a high reliance on ‘upgrades ‘, especially when in the case of a captive finance firm it’s their own product.
On balance we can say that if you don’t have experience in financing tech type assets now would be a good time to get some help! The ability for you to get solid info and advice on pricing, payment structures, lease and loan options, and end of term residual issues is key to your IT business finance success.
Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can help you navigate the tech finance jungle with valuable expertise.
Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 10 years – has completed in excess of 80 Million $ $ of financing for Canadian corporations . Core competancies include receivables financing, asset based lending, working capital, equipment finance, franchise finance and tax credit financing.
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