Sign On 
By Claudio R. Cury, Managing Director, Wells Fargo
Demand for technology continues to increase. Analysts predict the B2B technology sector will contribute nearly $5 trillion to the world’s gross domestic product (GDP) in 2024. Nearly 75 percent of that volume will move through more than one million channel partners worldwide.
Despite this positive forecast, the landscape has shifted for manufacturers, system integrators, value-added resellers (VARs), distributors, and others in the industry. Fueling new sales, while at the same time optimizing cash flow, working capital, and operating efficiency, are critical.
Tech companies face increased pressure
A number of factors complicate the order-to-cash cycle for OEMs and their channel partners.
- The rise of artificial intelligence (AI) has accelerated sales from hyperscalers, making them some of today’s largest customers. Many buy directly from manufacturers with extremely large orders. Sales from VARs, integrators, and others in the channel typically follow. This combination of direct sales and channel demand can put extra pressure on an OEM’s working capital and liquidity.
- Continued high interest rates and ongoing inflation impact the cost of capital. OEMs and channel partners who rely on lines of credit can find themselves paying more to sustain operations, with less excess cash to fund expansion or strategic initiatives. Delays between invoice and payment, supply chain snags, or other issues can take a larger bite out of profits.
- Competition from a global marketplace makes it easier for customers and channel partners to “shop around” for OEMs that provide the best financial incentives, potentially putting longstanding channel relationships at risk. Working internationally can exacerbate the situation as companies often need to carry more inventory, wait longer for payment, and deal with higher rates.
Adding to these challenges are the ups and downs of the economic and political environment. It all places extra pressure on tech company leaders to increase efficiency, reduce risk, and maximize sales.
Navigate uncertainty and fuel smart growth with channel finance
One solution that can alleviate these challenges is working with a reliable financial institution to offer a channel finance program. The right channel finance solution can reduce uncertainty, enhance cash flow, empower partners, and foster stronger relationships for OEMs and their valued partners.
Channel finance benefits OEMs with:
- Greater certainty around payment timing
- Stronger forecasts and more predictable cash flow
- Reduced Days Sales Outstanding (DSO)
- Less balance sheet risk
- Greater access to working capital and larger lines of credit
- More options to support channel partners such as extended terms
VARs, integrators, resellers, and other channel partners gain:
- Increased credit capacity
- Extended terms to better manage sales and cash flow
- Stronger margins
- More flexibility to negotiate sales and generate revenue
Best of all, once established, most OEMs with channel finance programs experience far greater growth compared to manufacturers that only offer open accounts.
Strategies for a successful channel finance program
The most effective channel finance programs provide tailored financial solutions to meet each OEM’s specific needs and go-to-market strategy. As you develop (or enhance) your organization’s channel finance offering, consider these strategies:
Choose a firm with proven tech industry expertise and established relationships. Channel finance has been around for decades, but many differences exist in types of programs and the banks that offer them. Finding the right solution to meet your specific needs will be paramount.
Look for a channel finance provider with innovative and flexible solutions rather than a “one-size-fits-all” approach. Understand your bank’s current footprint and where it maintains relationships with VARs, resellers, integrators, distributors, and other channel partners; established connections will allow you to scale up quickly. Ask about global relationships and international infrastructure to support global expansion.
Gain buy-in from both finance and sales. Within your organization, ensure that leaders in finance and sales support the program actively and align on mutual goals. Improving credit availability with channel partners is a great incentive to spur sales, but works best when all parties (including your bank) can communicate quickly and provide finance with clear visibility at all times. Channel finance also benefits CFOs and treasury management leaders with greater certainty around payment timing, stronger forecasts, and more flexibility with cash flow.
Deploy real-time technology. Channel finance means your bank will play a key role in facilitating transactions. Putting the right tools in place—including EDI integration and real-time API connectivity—will positively impact your transactions, your visibility, and your all-important channel partner satisfaction. Orders should move seamlessly—and completely digitally—through the process, with status updates and approvals available in minutes.
Develop a trusted, collaborative relationship. The tech industry remains dynamic, with order volumes, supply chain shortages, hot new products, and economic trends varying widely. There will always be a need to adapt quickly and work flexibly as conditions change. That means building a candid and trusted relationship with your channel finance provider—one where you can reach out, communicate clearly, and solve problems quickly.
Keep your order pipeline flowing smoothly
An optimal channel finance program improves customer and partner loyalty and keeps the order pipeline flowing smoothly.
Wells Fargo brings the strength and stability of a dedicated industry team, a global industry footprint, top-tier technology, and a proven track record of supporting OEMs and channel partners around the world. Our relationships extend across more than 1,000 channel partners, trading in 16 different currencies, with more than 25 years of experience. Connect with us to learn more and discuss your requirements.
