Information Technology Financing for Cloud Service Providers (CSPs)

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Information technology financing

What’s stopping you from growing the business you recently started? If you’re like most startups, the answer may be funding. The good news there is a lot of information technology financing options for IT solutions and cloud service providers (CSPs).

Depending on the lender you work with, you can even receive funding for your startup within 72 hours. After that, you can receive funds upon request. There’s never been a more opportune time to grow your IT business than now. Today’s thriving business environment is based on investment in the latest technologies. These include software, services and software as a service (SaaS). This means that companies specializing in IT solutions are at an advantage, because our world is becoming more digital by the day.

IT services that benefit from information technology funding

Information technology funding can benefit CSPs and IT consultants, by offering the following IT solutions:

Cloud financing

Offer cloud-enabled or cloud-based projects to other companies looking to strengthen their internal IT. These include configuring firewalls, virtual routers and management software. Customers can also choose between public and private cloud or a combination of both.

Hard or Soft Infotech

This type of IT solution is pretty straightforward. Fortune 1000 companies are looking for professional assistance installing hardware, software and networking components in their workplace.

Business app development

Now that the world is going mobile, companies are looking to develop their own apps. A mobile app will encourage customers to engage and interact more with their brand. If you are experienced in app development and maintenance, then this solution is for you.

Other projects

Companies with certain specializations are highly sought after for their solutions. These include network upgrades, data management, hardware or software development, and business management. If you are offering one of these solutions, financing may be beneficial to you.

In a market where IT companies are competitive, it is best to offer services that best fit your skills and strengths. This way, you can have more confidence in selling your solutions to customers and businesses.

Information Technology Financing: Using Factoring or Invoice Discounting

When it comes to technology financing, you might immediately think commercial loans. Loans are available for startups like yours, such as SBA Loans. However, this type of loan requires you to follow a comprehensive list of requirements. Not to mention, it may take a few months before you actually receive the funds you need to grow your business. After receiving the funds, you will also need to be aware of the loan terms when paying the loan.

Financing information technology through invoice factoring

Invoice factoring is another financing option and popular with CSPs. Factoring is not a loan: rather, you will be selling your invoices to a finance company. You will sell these invoices at a discounted rate to receive 70% to 85% of the total invoice value. You can then use this amount to grow your business.

Don’t assume that the finance company will own these bills. It will be paid directly by your customers once it expires.

This discounted price, also known as a factoring fee, can be between one and five percent. Everything will depend on the amount of your invoice, together with the creditworthiness of your client. Your sales volume is also considered when selling your invoices.

Unlike loans, factoring allows you to get approved much easier and get cash much faster. You don’t have to worry about collateral and other typical loan requirements. Keep in mind that some factoring companies may charge high fees. This is typical in exchange for their services.

Your customers’ credit scores will also play a role. And whether you will receive funds will depend on their creditworthiness. More importantly, some financing companies collect your invoices directly from clients. This means that you may lose control over them.

Invoice discount

The invoice discount is another financing option. It works very similar to factoring, but with some notable differences.

First, with invoice factoring, you get to choose which invoices to sell, and you can determine when to sell them. With invoice financing, you get a loan against a basket of bills. In other words, the invoice finance company is indifferent to the individual invoices you finance.

Another difference is in the amount that the financing company offers. Typically an invoice loan (ie financing), is about 60-70% of the total invoice amount. This is lower than factoring, which can go up to 95% but usually starts at 80%.

Another difference with discounting invoices is that you as a business collect the payment, not the creditor. With factoring, the factoring company collects payment from your customers instead. You can opt for financing instead of factoring, if you don’t want your clients to know about the deal.

Receipt of funds for both types of funding options can occur within 72 hours. This is ideal for startups if they want to start new projects right away to grow their business. There are lenders who also take on the credit risk for customers with low credit rating. But this is on a case-by-case basis.

Choose the financing option that you think is best for your startup. For more information, ask the lending experts here at LendingBuilder for help.

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This article was published by: Myles Leva by title: Information Technology Financing for Cloud Service Providers (CSPs)

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