The leasing companies have their finger on the pulse of the evolutionary changes sweeping the office technology industry, leading to new financing options.
Have you heard the one about the water purifier? This is less about delivering humorous, water-cooler punch lines and more about beefing up bottom lines, which is no joking matter. Smirk if you must, but did you know that Follet Symphony 110 purified water and ice dispensing systems retail for over $14,000? For $450 a month, Kelly Office Solutions can get customers into a 60-month lease, including service, through KOS Financial.
The North Carolina-based office technology dealer created its Pure Water Technology Division seven years ago. “We have a dedicated sales force concentrating on breakrooms and executive suites,” explained President Tim Renegar, who is not kidding around. Be forewarned, though: Hydration offerings likely will lead to stimulating a beverage business. Renegar pointed out that some high-end coffee machines are valued at over $12,000. In other words, there is money to be brewed in conference rooms.
He admitted to being reluctant at first. “I was not a quick adopter,” recalled the 50-year industry veteran. Renegar learned, however, that many of Kelly’s customers do not want to deal with the hassle of H₂O jugs. “The contained solution we offer is much cleaner and healthier for their employees,” he noted, adding that electrolytes are put back into the drinking water. With pure water/ice deals averaging in the $3,000 range annually, Kelly treats them like fair market value leases that don’t define a fixed purchase price at the end of the lease term. Instead, the purifying devices may be purchased for fair market value after five years.
Finance companies have been innovating on behalf of traditional copier/printer manufacturers, whether it’s U.S. Bank working with OEMs such as Ricoh or Wells Fargo with Konica Minolta. Together with KOS Financial, GreatAmerica Financial Services and LEAF Commercial Capital represent additional channel leasing partners with progressive perspectives on cybersecurity, managed print, networked IT, production printing, software, and other non-conventional products and services.
Rolling with Technology Changes
Phil Buysse is senior vice president and division general manager at U.S. Bank. Like Renegar, the 33-year industry veteran has seen it all when it comes to financing strategies for dealers. “I’ve lived through the various technological shifts—adapting from thermal to plain paper, from black-and-white to color, from analog to digital devices,” which he said dealers feared at first and then, “sold hard to businesses.”
Today, even electric vehicle charging stations are on the lease negotiation table for some corporate accounts, according to Tawnya Stone, vice president of strategic technology operations for GreatAmerica Financial Services. “EV chargers are outside of some dealers’ wheelhouses, but we’ve been approached with the idea,” she shared. Financing e-commerce programs has been another popular channel request as of late.
According to Stone, there are no hard-and-fast rules, noting that GreatAmerica Financial Services is a large and diverse organization with many divisions. “My colleagues are big on listening to our customers and conducting research,” she said.
With the e-commerce proposition, for example, they needed to understand what was involved regarding software programs and distributor integration. “We don’t want financing to be an impediment for dealers,” explained Stone. “We want it to complement what they’re offering.”
Financing Finesse
Whether it’s an equipment lease or a software script, Stone notes, GreatAmerica Financial Services steps in to help its customers determine three key factors:
- What are the installation requirements?
- What is the recurring revenue stream?
- What’s the value at the end of the term?
Buysse also has witnessed the evolution of financing, from straight leases to service-agreement bundles to the cost-per-copy wave in the late 1990s and FMV leases, the latter of which allows businesses to use the equipment for a fixed period in exchange for regular payments. Fair market value is determined at the time of the lease agreement. More often than not, due to technology obsolescence, dealers will take ownership at the end of the term. “It becomes really more of a loan arrangement,” he explained.
Kelly Office Solutions’ Renegar noted that finance partners typically structure tech dollar-out rates to make them much more palatable, making leasing a more affordable option. “Our customers can finance the entire amount,” he said. It may be higher, but payment is built in.”
Another attractive feature is bundling technology with copiers and multifunction printers. “U.S. Bank blends the rate, which is our saving grace . . . making us more competitive,” said Buysse. “Otherwise, it would be tough for us to approach firms looking at 150 to 200 seats [software licenses] per month.”
While they might not be able to afford a big cash outlay, most customers can qualify for lease payments over 60 months. “Mid-size companies represent a huge market in the Charlotte, Greensboro, and Winston-Salem areas we serve,” said Renegar. He added that although most IT services offerings have a 48-month lifecycle, Kelly writes most leases at 60-month terms. “We don’t do a lot of standalone IT, so we prefer to refresh after the fourth year and are responsible for the remaining 12 months,” revealed Renegar.
With less hardware being leased, today’s trend leans toward short-term rental agreements and subscription services. At least it’s “getting to be more that way,” observed Buysse. Renting security cameras and laptop computers is the way to go for dealers who don’t want to worry about residual-value estimates of how much the products are worth once the lease contracts are up.
“We can finance any type of equipment,” Buysse continued. “It’s more about the way a new idea is presented and marketed to customers . . . as well as the structuring and facilitation.”
Most dealers can write up a standard, 60-month copy machine lease in their sleep. But terms for leases on production and industrial printers can extend to 72 months or, to keep payments down, even 84 months (seven years). On the flip side, technology changes fast, so leases for IT servers and software programs which require more frequent upgrading usually are in the 36-month range.
APIs Help Facilitate
Financial institutions are increasingly employing electronic automation in the form of Application Programming Interfaces (APIs) to integrate related software with dealer operations. Think of this interface as a service contract that defines how the two apps communicate with each other using requests and responses. “APIs can work through dealer CRM [customer relationship management] systems to get us what we need to create contracts,” Buysse explained. “Entire transactions can be documented in the CRM. Dealer reps simply click on ‘application’ for credit approvals.”
Citing Einstein Conversation Insights (ECI) as one back-end API example, he illustrated how U.S. Bank collects and matches fee amounts before placing them in a general ledger account. Billing using Microsoft Excel is a newer development. “These spreadsheets allow dealers to breakout equipment types and itemize to different devices,” explained Buysse.
GreatAmerica Financial Services has been API-first for more than a decade. “I’ll put all my chips in the API bucket,” said Stone. “I’m a firm believer that it’s how people want to do business. Nobody wants to log into different systems anymore.”
At the end of the day, Kelly Office Solutions’ Renegar encourages dealer owners and managers to keep their eyes and ears open as well as their minds. “Always be looking because technology is always maturing and dramatically changing. Stay tuned in and be ready to embrace new ideas,” he advises. “We in the channel always have been creative and have facilitated the movement of information within companies. That has not changed. What has evolved is how we do that.”
With an ear to the ground, Renegar noted that Ricoh acquired audiovisual communications firm Cenero in 2022. “Video conferencing is booming,” he said, explaining that most people tend to buy teleconferencing equipment outright, so it’s not a big leasing opportunity yet. But the Kelly crew is keeping a collective finger on that pulse. Who knows? It could become their next impending event leasing gold mine.
Through the ebb and flow over the decades, listening has been the go-to strategy for financiers, too. “The best ideas come from the dealers,” emphasized U.S. Bank’s Buysse. “They bring the aspect of a deal to us regarding what needs to be funded.” Remaining open-minded and flexible has served U.S. Bank well.
GreatAmerica Financial Service’s Stone concluded by asking a question: Is leasing customization scalable? Whatever product or service is being financed, she said, “we make strong efforts to ensure that it is configurable.” Of course, whether they’re fair market value leases, EFA (equipment finance agreement) loans, or SFAs (software finance agreements), contracts must be written in a way that makes sense—and cents—for all respective parties and budgets. “The last thing any of us wants is a maintenance nightmare for our customers,” said Stone.
