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A Software Leasing Program Can Be A Supplement to Venture Capital, Mezzanine or Bank Financing
- Unconventional concept, but very logical
- The faster you increase your cash sales, the less the need for external financing
- A software leasing program for your customers can increase and quicken your sales
- Thus, a software leasing program can lessen the
need for external financing
What Are The Basic Functions Of A Leasing Company
- Fund software/hardware purchases in return for payment over time
- Take credit risk and software/hardware risk
- Provide tailored solutions to customers needs
- Proved a vendor the ability to offer the
customer extended payment terms without having to finance the payments
What Is Software Leasing
Software leasing is a sales and marketing tool designed to provide software developers with a lease financing alternative for their customers. The result can be an increase in revenues, a decrease in sales time, and an increase in customer satisfaction levels.
It is also a method of paying for software over time instead of a single upfront payment and the functional equivalent of a loan from the leasing company.
Benefits To Customers
- Obtain all the products and licenses that are needed now
- Eliminate or reduce capital budget approval delays
- 100% financing
- Preserve bank lines - or eliminate the need for a line
- Consulting, hardware, customization, and training costs can be included in the lease
- Easy to subsequently add or upgrade hardware, licenses, and consulting
- Customer owns the license to use the software at the end of the lease
- Simple documentation
- For the large company - solution to capital budget delays
- For the middle-sized company - convenience
- For the small or new company - an excellent
source of funds (maybe)
Benefits to Software Developers
- Shorten the sales cycle
- Expand your customer base
- Better satisfy customer needs - tailor the lease to the need
- Improve your competitive and financial position
- Gain you a competitive advantage
- Obtain marketing support from your leasing company
- Obtain increased revenues through flexible financing plans with upgrade provisions
- Obtain an extensive financing program with no financial obligations on the part of the partner
- Avoid obtaining bank lines to carry lease financing
- Avoid establishing lease billing and financial
lease accounting systems
How Do I Determine If A Leasing Program Will Benefit Me
- Is your average sale greater than $5,000?
- Do you sell direct to the user?
- Are your customers of relatively high credit quality?
- Do your customers normally lease hardware?
- Do your customers have budget limitations?
- Do your customers have financing limitations?
- Is your license transferable?
- Are your sales greater than $1,000,000?
- Have you ever leased software or hardware - as a lessor?
- Have you ever leased software or hardware - as a lessee?
- Do you have the time to explore leasing with a leasing company?
- Do you want to explore leasing with a leasing
company?
If all or most of the answers are "yes", leasing software may well benefit you and your customers.
What To Look For In A Leasing Company
- Experience in leasing
- Experience in your business or the software/hardware
- Reputation, particularly for fair dealing
- Service - work with you and your sales force to individually address the needs of each customer and customize a proposal that meets those needs
- Train your sales force
- Efficiency - complete credit approval and lease documentation quickly
- Financial strength or access to capital
- Competitive pricing
- Assume all credit risk
How To Do Business With A Leasing Company
- Explain your business
Software Characteristics
Customer Characteristics
Distribution Methods
Pricing-Per Item and Average
Plans for the Future
- Discuss if and how leasing might favorably impact your business
- Discuss how a leasing company will interface with your customers
- Discuss administrative aspects of the
relationship
What A Leasing Company Looks For - Ideally
- Acceptable credit risk
- Some risk protection from value of software/hardware or other collateral
- Acceptable return for the risk
- Potential upside from software/hardware at the end of the lease
- Maybe some tax benefits
- Some minimal level of business
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February 27, 2006