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IT Finance - How To Avoid The Credit Crunch

By Kimberlie Hutson

Republish: EasyPublish™
Published: 17Dec2008
Word count: 535
Viewed: 262 time(s)

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The combination of finances and business is an uneasy topic at the moment. Many companies are delaying spending money on anything that isn't deemed immediately essential for very understandable reasons. However, it's worth remembering that the old adage, 'if it's not broke, don't fix it' isn't always applicable. One area that your company really can't afford to be neglecting is IT. Technology is constantly changing and evolving, because of this, waiting for the economic climate to improve before you make any investments or upgrades, could prove detrimental to your business. The credit crunch is making businesses evaluate whether they should be investing or whether they should be postponing new technology investments, its important that customers don't defer projects, they need to look for those which will drive real efficiencies and benefits to their business for the future and they need to look at all forms of possible investment from factoring invoice discounting or equity or whether their assets based lenders and leasing companies could help them.

Any business, no matter how small or large, needs cash to function. It's essential at these times that businesses not only maintain their cash flow and drive that cash flow through the data book management, but also they look to extend and increase their cash facilities from the bank and from any other form of financier.

It may not be as easy for a smaller business to pay for new technology investments, however, any investment which is taken needs to deliver return for the company, so whether its efficiency in terms of saving costs or in driving increased sales opportunity (which will ultimately deliver more profit for a business), that's the critical decision smaller businesses have to make. Most companies will be able to pay for this through cash, ether through its own reserves or through borrowing from a bank or a bank facility or by using other forms like additional equity or a third party financier that can provide them with that facility to make sure that that investment is made.

Traditionally, most businesses will look at cash or other bank facilities that they've already got set up. However, there are other sources of funding available out there and businesses can look at people like asset type lending like leasing companies like IBM for example, who will offer funding for their own IT hardware/software services. Most asset-based lenders secure any funding that they offer on the actual assets that the business is buying. For example, any IT products would be secured on the hardware etc. Ultimately an asset-based lender will use the asset that you're acquiring as the bases for collateral for that funding.

Ultimately when anyone invests in a new technology project they're looking at hardware, software and services as part of that technology investment. If you use financing correctly, you can get the deferral of the cost of that to match the income and the benefits you're going to get from investing in that project. The best way to do that is to make sure you're not incurring the cost until you get those benefits, ultimately, that will drive long-term profitability.

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