Monday 18 December 2017

Finance unit is a double win for computer giant

Computer maker Dell has no plans to start taking customer deposits, but like many large companies, its bottom line is at risk because of the scarcity of credit for businesses in Europe.

Dell's deep pockets mean it can extend its own credit facilities, enabling customers to place orders now rather than waiting for banks to lend again.

Extending credit does not necessarily mean handing over €20m to a business customer to help them buy Dell products; in reality, big company vendor financing is about forms of deferred payments.

Car companies have been doing this almost as long as there has been a car industry; indeed, it is arguable that the US automotive industry risked being strangled at birth before Henry Ford hit on the idea of using his early profits to advance the price of his cars to an ever-wider circle of customers through his own lending arm.

Offering finance is a double win. It means customers can afford the products and generally end up paying more in the form of interest than the list price.

On the other hand, leasing equipment can work well for business customers because they avoid capital outlay and have the added advantage that they do not end up owning technology that is obsolete by the time it has been paid off.

Irish Independent

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