When financing IT is the right choice!

In many instances, financing IT rather than cash purchase can make sound business sense. Financing relieves pressure on cash flow, and enables an IT investment strategy that adapts to changing business circumstances easily and cost-effectively. With financing, the need to assess competing cash requirements within the business evaporates. IT investment decisions can be accessed on the merits of the business and technical case without worrying about the cash flow impact. Where it is a critical business demand to meet management

Highlights

In many instances, financing IT rather than cash purchase can make sound business sense. Financing relieves pressure on cash flow, and enables an IT investment strategy that adapts to changing business circumstances easily and cost-effectively. With financing, the need to assess competing cash requirements within the business evaporates. IT investment decisions can be accessed on the merits of the business and technical case without worrying about the cash flow impact. Where it is a critical business demand to meet management and customer needs rapidly, financing IT acquisition can offer a key competitive advantage.

Benefits of leasing
Surveys conducted by business and technology analysts consistently identify the benefits of leasing IT and highlight its growing popularity. Particularly when traditional credit is in short supply, businesses consider financing—and many subsequently become converts to the leasing model. Financing can offer a range of benefits:

Payments become predictable and manageable over planned periods of time
Capital and lines of credit can be pre-served for core business investments
Flexible financing terms can allow payments to match business needs
In many cases, the finance provider take on the obsolescence and disposal risks
Mid-lease upgrades and end-of-lease options provide ease of decision making for the IT department


Analysts approve
According to IDC1, the main advantages of leasing are the ability to adapt to changing business requirements and the change in allocation from capital to operating expense. Leasing may have little or no impact on a company’s ability to borrow, and can in fact improve key financial measurements such as return on assets or debt-to-equity ratio.
Additionally, IDC reports a range of other key benefits for leasing, including:

Analysts at TowerGroup2 report that the changed credit environment is pushing lenders towards the more traditional three Cs of credit: character, capacity and collateral.
For example, in a period where commercial real estate and construction loans from US commercial banks declined more than 60 per cent, other commercial and industrial loans grew by more than 9 per cent.
The scarcity of bank capital at times of uncertainty and the desire to conserve cash place financing at the top of the list of options for IT decisions. In short, the current economic climate has made IT financing an imperative for many businesses.

Pride of ownership
The constant and pressing need to do more with less, to introduce innovative technologies, and to cut expenses, is felt most keenly in the IT department. Advances in hardware and software mean that newer technology offers far greater price-performance, yet the case for new IT investments requires detailed justification, particularly where retaining cash in the business is at a premium. The pride of ownership is a deeply felt emotion, and not everyone is comfortable with the idea of leasing. Perceptions of paperwork and the Perceived contract complexity can also deter financing initiatives. Leaving emotion to one side, the need for business efficiency and financial strength in tough trading conditions means that financing should always be one of the first con-side rations for IT purchases, and using cash one of the last.

Predictability
Gone are the days of predictable trading conditions—if they ever existed? New channels to market spring up, economic tides rise and fall, and competitors are bidding to steal customer’s 24/7.Predictions of future user numbers, data volumes, bandwidth requirements and new application areas can be inaccurate. Committing cash to outright purchase is a one-way bet that the systems will cope with the forecasted growth and change. With financing, the initial system may be designed for immediate and near-future requirements, with no need to provide capacity to cope with tomorrow’s unknowns. If trading circumstances change and systems need enhancing, financing can allow expansion with replacements and upgrades to be added to a revised lease as and when the business needs arise.

Increased purchasing power
Leasing offers increased acquisition power by reducing costs. An IDC study reveals that by not integrating operational cost/performance data with lifecycle replacement planning and lease-versus-buy capital analysis models, businesses may be incurring annual costs of around 20 per cent higher than necessary to acquire, manage and decommission IT equipment. As well as offering increased acquisition power by reducing costs, financing can greatly simplify financial management. Simple lease payments replace multiple vendor payments, making it easy to identify, manage and control IT budgets, helping to improve ROI analysis and business case justification.

Business flexibility
Even with a stated policy of cascading older systems through the enterprise, few IT managers are able to insist that staff will inherit equipment. Such systems tend to be taken out of service and simply held on site until, at a price, disposal is arranged—a slow and costly business timewaster.
With leasing, at the end of the agreement there is a range of termination and asset disposal options, designed to meet various business conditions. It could be that the systems still deliver great service: in which case, extend the
Lease at modest cost and continue to benefit from the advantages of financing. Perhaps there is no longer a need for that server or PC; simply return it, and the problem, like the hardware, vanishes. Or finally, the equipment may be purchased at a fair market price. Financing provides the flexibility to focus on the business of business, and eliminates many of the asset management issues of IT.

Think you cannot afford IT?
Many traditional sources of credit are reluctant to fund IT, seeking additional collateral against loans and financing deals. General finance institutions, such as banks and brokers, generally do not possess sufficient industry knowledge to make accurate assessments of fair market values, and may cover their risk with increased financing rates. MGBS Leasing Solutions can offer a comprehensive range of leasing and loan options specifically designed to meet the needs of IT acquisition, from thou-sands to millions of dollars.

Based on market knowledge of equipment residual values, MGBS Leasing Solutions leases are secured against the IT systems themselves. Businesses may use the new IT equipment itself as collateral against the lease. Rather than find cash for new systems, or offer collateral for loans, MGBS Leasing Solutions makes it possible to support even very large and complex IT investments with minimal initial funding.

Now think again
Not everyone has a new project or IT infrastructure refresh planned. Perhaps the PC network, servers and routers all run just fine, bought and paid for (and, of course, depreciating). But what happens if a director demands an inter-active self-service customer-driven sales portal, to be delivered without additional budget and without bank support? Turn to MGBS Leasing Solutions. As well as using a lease to make a new investment possible, the residual value in existing IT equipment already purchased and in operation can be exploited—in effect, selling systems to MGBS Leasing Solutions and then leasing them back. The cash raised can be used to make lower initial payments on the new lease, which includes the new systems, development and implementation costs.

The total solution
MGBS Leasing Solutions can provide practical financing options to IT investment challenges. For example and MGBS Leasing Solutions can help improve cash flow with a sale and leaseback for existing infrastructure. Systems sold and then leased back may be!!!!

MGBS Leasing Solutions has created deals where mixed manufacturer infrastructures have been sold on leaseback terms, releasing residual values that enable the next IT investment steps. MGBS Leasing Solutions has a unique understanding of technologies, their residual values and the cost of disposal, knowledge which is used to offer highly competitive financial terms.

To receive an immediate quote for any I.T. lease or finance requirements your organization may have, please email mgbsleasing@mgbsinc.com or contact Thomas Simon at 1-800-323-5404 x 12