Leasing keeps the lights on for tech-conscious SMEs
10 April 2017 | 0
As the IT industry has matured, the assumption that hardware has to be paid for upfront has mostly remained. Yet we don’t see this in the photocopier industry, where no-one expects to hand over tens of thousands of euro in return for a machine; it is a given that they will lease it instead, paying much lower amounts in regular instalments.
Even as the leasing model has started to emerge as a viable option for procuring IT, it has mostly been driven by vendor financing, which typically involves large organisations buying equipment from a single supplier at sufficient scale to justify a deal like that.
Many SMEs aren’t aware that leasing finance is also available to them, and that the deals do not necessarily require them to buy products from one particular manufacturer. Just as the cloud’s business model put enterprise-class software in the hands of SMEs for a fixed monthly fee, leasing finance can allow those companies do much more with their budgets than they could if they had to make a large upfront outlay from capital expenditure.
In our experience, once companies realise how much they will be paying per month through a leasing arrangement, it becomes easier for them to work out their budgets, and to stretch them further than they first thought. Leasing also frees up essential funds for a company’s cash flow, which is critical for SMEs.
Many IT purchases are driven by an immediate need, such as an old server reaching its end of life. In a lot of cases, companies see what their monthly payments would be, and realise they can consider a higher-spec server than the one they originally intended to buy, or they can supplement the purchase with some laptops or workstations, or by upgrading network switches as part of the same transaction.
“Once companies realise how much they will be paying per month through a leasing arrangement, it becomes easier for them to work out their budgets, and to stretch them further than they first thought. Leasing also frees up essential funds for a company’s cash flow—critical for SMEs”
In an ideal world, a structured IT upgrade plan is well suited to leasing because it provides simpler planning and defined op-ex costs, but as we know, technology is made of many moving parts and one or more of those parts occasionally come to an unexpected stop. When an unplanned event happens, businesses can simply log on to our portal and we provide a fast response to ensure they can restructure their leasing agreement to incorporate a sudden change.
GRENKE Leasing has the advantage of being vendor and bank-independent, which gives customers great flexibility because they’re not locked in to buying hardware from a single manufacturer and the supplier can be paid within 24 hours. If the solution that includes elements from three different suppliers, our flexible finance arrangements can accommodate that.
Equally, if a business already has a preferred IT partner or reseller, it’s a very simple process for us to get that provider set up on our systems, allowing the relationship between them and the customer to continue on a more solid financial footing. For operational reasons, many businesses prefer to have their systems hosted in a third-party data centre, and our lease agreements allow this option too.
There are few limits on the kinds of purchases that leasing can facilitate. Our arrangements can start from as little as €500 upwards, rising up to €1 million. The average deal we cover is in the €7,000-€8,000 range. Depending on the type of hardware, deals are usually structured over a three-year or five-year term.
Most of all, now that cutting-edge technology is a competitive differentiator for many businesses, leasing ensures smaller companies aren’t at a disadvantage when the time comes to upgrade.
Justin Twiddy, managing director, Grenke Limited