Resellers sound off over channel credit card

The Australian channel is divided over the Moneytech dealer credit card service that company founder Hugh Evans claimed 'irons out all the lumps and bumps' in a reseller's cash flow.

Evans –- the former boss of defunct distributor Siltek -- this week launched Moneytech, a third-party financial services provider for the IT channel.

Evans said the DealerCard was not just for resellers who couldn't get credit. 'This card irons out all the lumps and bumps in your cash flow.'

He said the card also took the pressure off distributors as they didn't have to handle the risk associated with dishing out credit to the reseller channel. Using the card, dealers could reconcile all their purchasing to one payment every month, he said.

Unlike an ordinary credit card, all the fees a dealer paid on the card were tax deductable, he said.

Resellers would be offered a Silver (up to $100,000 in credit), Gold (up to $250,000) or Platinum (over $250,000) dealer card. Evans said that within the next three to six months, the company would be offering credit limits in excess of $1 million.

Upon application, each dealer was 'credit scored' and the company would do a 100 point check on the business 'just like the banks do,' according to Evans.

The card offers 30 days interest free terms with an unsecured interest rate of 17.5 percent after the month. But Evans claimed that payments received in 60 days would incur an average interest rate of around 8.75 percent.

'It's a true 30-day interest free [period],' he said, adding that if a dealer paid on day 32, it would only pay two days' worth of interest.

A lower rate would be offered for secured customers. Evans said the company hadn't decided what that rate would be as yet.

Dealers who used the card would also have the option to extend their credit and continue to trade without being put on 'stop-ship' by a distributor if they hadn't paid their bills at the end of the month.

Resellers and distributors alike had mixed feelings about the service.
Max Goldsmith, MD at reseller XSI, said he saw it as a risk and said, 'I'd hate to be underwriting it.'

'It would concern me -– I'd hate to think that my reseller was paying me with that credit card. I'd be looking at him saying, 'Hang on, you're obviously not in a solid position, old friend',' he said.

'People always don't meet their payment obligation and that's what causes the industry such problems, particularly if you're dealing with government,' he added.

Bruce McCurdy, MD at Brisbane-based reseller Clariti, said that for small organisations, the card would be a good help for resellers, but added: 'Is it a concern about their credit risk? Yeah I would question it.'

'If they're marketing this product at the small one-man operations then I see it as being a convenient way for them to run their books,' he said.

'I remember when we first started Clariti, getting credit was impossible. I'm going back to 2000 –- sitting there with a $10,000 purchase order and having to scrape it through on our bank accounts and credit cards. Nowadays, we don't even bat an eyelid at it because we've got established credit ratings.'

He added: 'If you're starting out and struggling to finance a couple of large deals which could be lucrative for you, then it's not a bad way to go.'

Evans, however, said the card was open to all types of resellers, small or large.

David Gage, GM at distributor Express Online, said if the card was extending the credit available in the channel, it's going to make it easier for resellers 'which is a great thing for us.'

'It's an additional method of payment which is good for us. I see it as a positive,' he said.

Rod Fever, MD at small Sydney-based reseller PC Fever, said offering an additional third-party credit service to the reseller channel was not necessarily a good thing. 'Because the business is unregulated and it's an invitation to anyone who's got below average morals to run up a huge credit bill, sell all the gear and just vanish,' he said.