A capital idea from Cisco

Networking colossus Cisco has announced plans to inject US$750m in short-term growth capital into the market to expand global credit capacity for channel partners. A significant chunk of this fund is earmarked for the Middle East market.

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By  Stuart Wilson Published  April 10, 2005

Networking colossus Cisco has announced plans to inject US$750m in short-term growth capital into the market to expand global credit capacity for channel partners. A significant chunk of this fund has been earmarked for the Middle East market. Of the US$750m total, US$250m will come from Cisco via 30-day open account terms with the remaining US$500m pumped into the channel by Cisco Capital through third-party finance partners in the form of inventory and short-term project finance programmes. Cisco claims that the capital injection will expand the credit capacity of qualified Cisco channel partners and enhance the terms and reach of programmes currently offered by its third party financing partners. The vendor believes that the additional funds will allow channel partners to better manage cash flow as they penetrate new markets, secure new customers and sell solutions. Rob Lloyd, president of Cisco’s EMEA operations, explained the benefits for the Middle East channel: “I will be very clear in saying that one of the key areas that will benefit from the US$250m risk credit line will be the Middle East. This is a constraint with the letters of credit and many of the processes that we need to go through because of the emerging nature of the market; because of the differences in currencies, because of export and on and on and on — it is complex. So we think some of the key beneficiaries of the US$250m risk trade credit facility will be partners in the Middle East.” “This is very good news for the Middle East. This will be big. I think you have to have liquidity in both the distributor and the VAR community depending on the nature of the buy-sell relationship,” continued Lloyd. “It could be that some will be direct credit lines with Cisco, while some could be increased credit lines from our distribution partners. It will vary and it will be customised based on the way that we go to market.” Cisco Capital has also announced the introduction of a new simplified leasing programme designed to complement the vendor’s thrust into the fast-growing commercial and SMB customer segments. The simplified leasing programme will offer partners financing tools and resources through a highly automated, web-enabled tool to expedite credit applications, approvals, documentation and funding. “We saw an opportunity to make a significant impact in two key areas, the commercial-SMB market and the channel,” said David Rogan, president at Cisco Systems Capital. “By helping channel partners better serve the financial needs of our mutual commercial-SMB customers while at the same time providing select partners access to expanded credit capacity, Cisco is utilising the competitive advantage of Cisco Capital to make an impact in both of these key growth areas,” he added. Cisco’s latest finance initiatives will provide credit support for distributors and channel partners needing greater flexibility to manage their cash flow during longer project payment cycles. Injecting credit into the IT channel is a prerequisite for vendors hoping to achieve rapid growth rates.

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