With the move by many technology vendors to sell their traditional products via a subscription model, it may make sense to consider where different financing options could be more cost effective for your business.
The traditional method of paying for technology was simply to pay for the total amount up front, and then depreciating that over time. In many cases you were not able to depreciate the cost of things such as software and services which are part of most IT projects. Over time these restrictions have been relaxed or modified to the point where you can generally bundle just about everything to do with an IT project together into a single lump sum amount.
As the technology investments for many businesses have increased, so too has the amount of funding they require. Having to pay for these investments up front can have a significant impact on the cash flow for a business. Thus, many are electing to finance the cost of their technology investments over a period of time. This has allowed them to convert the bulk of the up front cost to an easier fixed monthly cost, which is generally kinder on cash flow.
There is also nothing stopping a business mixing and matching the way it finances its technology. Perhaps a partial investment is made up front, while the remaining costs are spread over a period of time as monthly costs. The main point is that there is now more flexibility than there has ever been when it comes to technology financing.
Not only is there greater flexibility in how technology is funded there is also a significant amount of flexibility in where that financing is obtained from. The traditional bank option may come with too many restrictions for some businesses in regards to extensive application processes and approvals, but luckily there are now plenty of other options. Most of these can be tailored to the exact need of the business.
Although funding flexibility is now much greater than it ever used to be, the fundamentals of obtaining credit remain the same:
- Understanding why financing is required
- Calculating what the true ‘cost’ of financing will be over the time period
- Determining what the return on investment will be if funding is adopted
Financing your technology doesn’t have to be hard, even though there are now more options than ever. That’s where Correct can assist. We can work with you to determine the best financing option for your business and one that makes sense. In many cases we can also help to arrange financing through our contacts in the field.
So for all your financing questions please contact Correct on (02) 8831 8200. We are here to help.
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