|Budget Delays||Progress Payments||Reducing Discounts|
|Budgeting Requests||Great Service||Industry Experience|
|Small Leases||All Costs Included||Increase Sales|
|Distribution Channels||Working with All Vendors||Prequalify Your Customer|
|Shielding Your Customers||Informal Relationships|
Larger customers sometimes have to delay software acquisitions because such acquisitions have not been included in capital budgets and the amounts involved are substantial. We recently entered into leases of $134,000 and $82,000 for a major oil company and a major software developer that resulted in software sales being made at least six months earlier than would have been the case if capital budget approvals had been required. In situations where the customer may only have a limited amount in its budget for the current period, we can provide a lease structure with lower payments in the initial year and higher payments later. By offering your customer the opportunity to lease, you make the sale today, providing the customer with the software they need now, without wondering if your customer will be back tomorrow.
We have worked with one customer in making progress payments to the software developer for customized software. As modules were accepted under lease, the progress payment loans converted into leases. The only payments made during the progress payment period were interest payments on the progress payment loans. The structure allowed the customer to avoid making huge cash outlays, and it further allowed the customer to make rental payments only after the benefits of using the software commenced.
A number of our software vendors have found that they have to discount their software in order to be able to quickly complete a sale. As an alternative to upfront discounting to the user, some vendors are making smaller discounts to LPI which has the effect reducing the effective interest rate to the user and making the transaction more salable.
In two recent cases involving leases of $750,000 and $1,033,000, each lessee obtained a 0% interest rate lease. The software company concluded it was cheaper to absorb the interest rate discount than to offer a discount on the software.
A software vendor indicated that one of its customers requested an operating lease. We created a lease that met that request. From LPIís perspective the lease was a finance lease, while from the customerís perspective, it was an operating lease. We accomplished this by paying less than the vendorís full price upfront. The software vendor in effect bore the renewal risk. As long as the customer renews the lease, the software vendor will obtain its full price out of the future revenues and it is possible for the vendor to get more than its normal price. In order to protect the vendor, we pool all these transactions so that in those rare situations where customers donít renew, other transactions are available to support and pay the deferred purchase price.
You and your customers will find our services to be creative and flexible. We believe we are very easy to do business with. We will do everything possible to ensure the customer is more than satisfied.
In one case involving a major international bank, the bank, already having done prior business with the vendor, had a master lease in place with the vendor. To obtain additional hardware/software, the bank had to send the LPI lease to its Legal Department for review and approval. Rather than delay the sale, we suggested we use the lease of the vendor. The customer has come back to us on subsequent occasions to lease additional items.
In another case, a customer had an agreement with its bank which might have given the bank a lien on any acquired software. This could have led to time consuming legal discussions. To solve the problem, we quickly modified our lease to take a second only to any bank lien. On two subsequent occasions, weíve leased additional software to this customer.
We can cite additional cases where customers came back to LPI to take advantage of our leasing services for other items such as additional software, hardware, and office furniture. These customers found our services prompt, our lease structures creative, and our method of transacting business flexible.
One software vendor needed to lease $300,000 of computer hardware. The manufacturer wanted a 100% collateral account to close the transaction. When we were asked as to the market, we suggested that a 50% collateral account would be appropriate and fair. The hardware manufacturer was not willing to be accommodating and we ended up handling the lease for the vendor.
Weíve had a number of discussions with software vendors who offer packages in the $5,000 to $15,000 range. Their experience with offering leasing for this transaction size was essentially nonexistent. They were pleased to find that we could accommodate this size transaction and their customers. There is a preconceived notion that only investment grade companies with large ticket items can lease software. Thatís not so with the LPI Software Funding Group. We can usually accommodate the broad spectrum of customer types and their software needs.
We provide for the customer to include training, installation, and conversion costs in the lease. We believe that all of these elements add value.
In one of our vendor programs the vendor allows the customer to finance additional years of support and maintenance over the term of the lease. This allows the customer to purchase maintenance for the future at today's prices. The benefit to the vendor is it can increase the average size of their sale.
A number of our software vendors sell through the reseller channel. One vendor is offering our leasing program to all of its VARS. The VARS can deal directly with us or through the vendor, depending upon the preference of the vendor.
We normally work with software vendors who have been in business at least two years, have more than $5 million in sales and more than 10 employees. However, we have found that in a number of cases, we believe that the software vendor will be successful and we are willing to take the time to work with the company. A unique situation in this respect related to a company which is spinning off from a major industrial company. The spin-off is not yet complete, yet we examined the technology and, believing there is substantial merit in the overall concept, agreed to do a leasing program for that company. Of course, the credit of the lessees is the real risk and thus what we risk is our time in putting this program together.
One of our vendorsí sales force contacts us even before seeing the customer for the first time. Within two hours we give them a tentative approval of the credit and a tentative lease rate. Thus, they are able to bring up the leasing alternative at the initial meeting so that the customer is aware that the leasing option is available and budget questions are eliminated from day one; this allows the sales person and the customer to concentrate on the merits of the product.
A software vendor was delivering several modules of software over five months. We entered into a master lease at the very beginning with the customer and the customer signed five lease schedules. As each module was accepted, the customer forwarded the acceptance certificate to us and we immediately paid the software vendor. The advantage of this was that all the paperwork was completed at the very beginning, thus precluding competitors from attacking the customer.
In some situations a software vendor has not entered into a written agreement with LPI, but wants to be able to refer transactions to us on an as needed basis. We provide this option, but we generally need to be more strict in our credit decisions because there is no written agreement as to the rights and obligations of each party.
© LPI Software Funding Group, Inc.
593 Cricket Lane, Suite 200 Wayne, PA 19087
610.687.4434 610.341.6100 email@example.com
February 27, 2006