How distributors are helping their partners

The ability for distributors to offer, lend and extend credit and financing to partners is nothing new. However, because of a weakening and uncertain economy, many distributors have had to revise the ways in which they are able to, or not, in some cases, provide this out.

According to Paul Edwards, director of SMB and channel strategies at IDC Canada, the economic crisis has impacted distributors and partners across the board because end-users are spending less and there's less credit being made available now.

"The biggest hit comes on the hardware side which is the biggest part of the overall market and is what the distributors and their partners count on for their business," he said. "Distributors bring credit to partners who may not have the capital to buy a big roll out of IT. They'll provide credit to the partner so they can then do the deal and roll it out and they'll pay back the distributor once they get paid from their clients."

But here's the problem though, Rick Reid, president of distributor Tech Data Canada, says that because many customers are slowing down their payments to the reseller, this in turn, causes a significant backup and issue in the distribution supply chain.

"Small to mid-sized resellers especially, usually don't have the ability to pay in advance large invoices, so they wait for the customers to pay them" Reid said. "Because of this, the reseller can't pay us back as rapidly as they once could, and that's really when the issues begin."

A reseller's ability to pay the distributor back in a timely manner is critical to the distributor's decision of whether or not to extend credit and financing to them, Reid said. When it comes to granting credit to resellers, Reid says the distributor will look at the reseller's profitability, their equity in the business and also how quickly they're able to pay the distributor back.

Yves Hebert, vice-president of sales, cofounder and owner of Telenet Informatique Inc., an ISV, VAR and solution provider located in Chicoutimi, QC, and also a Tech Data Canada reseller partner and TechSelect member, said it's important for his company to leverage the credit and financing offerings provided by Tech Data.

"We're using a bit more credit (from distributors) than we were before because it's harder to collect money from customers now," Hebert said. "We have good credit lines because we've been a customer of theirs for a while and we have a credit history with them. It's tougher to get paid in the 30-35 day time period with our customers now, so sometimes we need to get an extension of four to five days with the distributor."

Sign up for ITworld's Daily newsletter
Follow ITworld on Twitter @IT_world

• Email
• Print
• Share
  • Slashdot
  • Digg
  • Stumble
  • Reddit
  • Newsvine