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Finance HaaS yourself or find a trusted partner?

The pros and cons of each option

October 12, 2020

Finance HaaS yourself or find a trusted partner?
Whether you’re an MSP, UCC provider or systems integrator, you’ll need to identify a financing model to provide hardware as a service (HaaS) in your portfolio.
 
You essentially have two options to consider: fund technology for your customers yourself or partner with a third-party company.
 
To help you decide which financing model is better for you, consider the pros and cons of each option.
 
 
Option A: Finance HaaS yourself
 
Pros:
  • Additional income—Since you’re managing the lease, you’ll make a profit on the interest the customer pays.
  • Recurring revenue—With monthly payments from customers, you’ll be able to count on additional recurring income.
  • Control of the customer experience—Since you’re funding the lease, you can create a unique structure to the agreement to meet any special billing arrangements the customer may need. 
Cons:
  • The risk of customers not paying—If the customer defaults on their payment, it can jeopardize the financial health of your business.
  • The administrative burden—Financing transactions for customers requires a number of additional administrative costs. You may need to hire new staff to manage everything from financial modeling to billing collective.
  • Cash or credit lines tied up—This can limit your ability to make investments to benefit your own business.
 
Option B: Partner with a third-party financier like Ingram Micro Flexible Payment Solutions (FPS)

Pros:
  • Immediate profitability—Rather than having to purchase the equipment and wait months or years to recoup the cost, you’re able to pay the technology distributor immediately and keep the remainder as profit.
  • Limited or no risk—If the customer defaults on payments, you bear no risk or responsibility. If they pay late, stop paying or go out of business, the third party finance company will be the one making collection calls, filing paperwork and ultimately taking a loss. In most cases, the technology reseller (you) has zero financial liability for the contract. When you’re selecting a financing partner, be sure to double-check their policy in this regard.
  • Hands-off process—You won’t have to worry about any of the details of managing the financial relationship. That will be your financial partner’s responsibility.
  • Financial freedom—With no funds tied up in financing, you’re free to devote your financial resources to expanding your own business. 
Cons:
  • Less flexibility—You do lose a bit of control with this option. A third-party financing company will have specific guidelines for approving transactions and terms of lease agreements, limiting your ability to grant your customer special requests or financial provisions.
  • No financing income—The financial partner will receive the income derived from interest payments, not you.
  • Another relationship to manage—You’ll have many potential partners courting you for your financing business. It's important not to get distracted by attractive rhetoric. Choose a partner who best aligns with your company's customer service strategy. You’ll need to set aside time to find that ideal partner for you and your customers—and to build and manage your relationship with them.
 
Which option should you choose?
 
Ask yourself these questions to decide what’s right for you:
  • Do you want to have total control over the customer relationship?
  • Are you okay becoming a financial institution yourself and taking on all the financial risks? 
If you answer “yes,” then self-financing may be right for you. Just keep in mind the drawbacks listed above.

If you answer “no” or “I’m not sure,” the third-party option may be the better choice.

Many MSPs don’t have the bandwidth to scale financing as their customer base grows, and the risk of self-funding can lead to financial loss if a customer defaults—and take your entire company down in the process. So, consider finding a financing partner like Ingram Micro FPS, who takes customer care as seriously as you do and will operate as an extension of your team.
 
To learn more about partnering with Ingram Micro FPS, contact financialsolutions@ingrammicro.com.