MSPmentor Blog

Is Traditional Financing Putting You in a Box?

How can MSPs integrate financing into their selling motion, but still keep the benefits of leasing, including non-recourse contracts and accelerated cash flow? Many are turning to distribution partners to accomplish this and help increase their profitability.

Many customers today are moving beyond the traditional break/fix model of support--they’re having difficulty maintaining their IT infrastructures, and are now considering how managed service providers can take over their cloud services.

These managed services require significant investments in monitoring, management and maintaining systems, as well as new financial models altogether. However, managed service providers are not value-added resellers; their business model often doesn’t fit with traditional leasing or other financing solutions that are offered in the marketplace. Traditional leasing can be too expensive, carry too much credit risk or divert potential revenue from your service contracts.

Most traditional banks and leasing companies will try and put you in the same box as a VAR, but that’s just trying to fit a square peg into a round hole. Banks and leasing companies often want to sign you up for traditional contracts that expose you to credit risk on all your managed service agreements. And most MSPs would rather integrate financing into their deals, but do not know how to go about it.

How can MSPs integrate financing into their selling motion, but still keep the benefits of leasing, including non-recourse contracts and accelerated cash flow? Many are turning to distribution partners to accomplish this and help increase their profitability.

Cloud Financing Programs

One of the key benefits of working with distributors is that they offer a variety of options to finance your deals without leasing, depending on the level of involvement of your partners in the channel.

  1. Managed Services Financing

This is an arrangement in which a lender or a distributor credit approves the solution based upon your end customer. The lender takes a blind assignment of your managed services agreement and then bills and collects from the customer for you.

  1. Software Subscription Financing

Under this model, a financing partner funds the entire term of your subscription agreement, and handles all the back-office billing and collecting. A blind assignment of your subscription agreement may be required.

  1. Buy Backs

Some distributors will purchase your existing data center equipment and transfer it to a payment plan. This gives you cash forward, while you retain possession of the equipment throughout the term. You may even be able to upgrade the equipment at the end of the term.

  1. Partner Label Agreements

You can also sign an agreement with a partner, allowing it to use your branding to deliver contracts, as well as bill and collect in your name.

If you’re interested in learning more about how Arrow Capital Solutions cloud financing plans can support you in building your annuity revenue stream, please contact Tim Bertrand (West) at tbertrand@arrow.com or Scott Riley (East) at sriley@arrow.com.

Wayne Peters is Arrow Director, Sales/Financial Solutions.

 

 

 

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