Hardware Financing Terms Tightening

Loans used to purchase servers and other data center hardware are becoming harder to find. What will this mean for the data center market?

Loans used to purchase servers and other data center hardware are becoming harder to find, which could leave some customers unable to finance IT purchases, or more inclined to buy from well-heeled vendors who can offer financing. The Wall Street Journal (subscription) reports:

Troubles are brewing in the technology-financing business, the credit that greases many technology sales. Defaults on tech financings, loans that allow companies to purchase computers, software and other products, have spiked this year. The problems are surfacing after years in which such loans flowed freely. Now the banks and specialty lenders that most tech companies rely on to finance customer sales are retrenching, and financing terms are getting tougher. Some big tech companies, such as International Business Machines Corp., Oracle Corp. and Cisco Systems Inc., are stepping into the void -- lending more of their own money to customers and taking on new risks.

Who stands to benefit? IBM, Cisco and Oracle all have large customer financing operations. How bad is the problem? In September, 0.86% of equipment loans were written off as losses, up from 0.48% a year earlier, according to the Equipment Leasing and Finance Association, an industry group for 700 lenders. Tech-financings will reach $88 billion, about 14% of the total amount spent on computer hardware and software this year, estimates research firm IDC.

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