Spending on IT products and services in Australia is expected to reach A$93 billion in 2019, according to technology research firm Gartner. Nearly every business will need a healthy IT budget in order to remain competitive. However, many businesses don’t have enough cash on hand for such sizeable investments. Fortunately, cash is not the only way to embark on these important IT projects.
We know that the alternative to funding an IT project outright – financing – can seem unappealing for firms that don’t want to take on high levels of debt. Despite these concerns, as long as companies are smart in how they go about financing, this is a viable option for keeping up with IT demands in this highly digitised and technology-driven world. Companies should consider the reasons to finance, types of financing available and key considerations in choosing a financing option as they make their decision.
Main reasons to finance IT projects
As we listed above, the biggest obstacle to implementing IT projects is often the budget. New technology can be one of the largest investments a company makes. While the payoff – whether through revenue improvements or cost savings – is expected to outweigh this investment, it’s still a difficult decision for many companies. Financing the transaction can make this decision easier on the company, and it can lower the hurdles that many companies have to overcome in order to remain competitive.
In our opinion, the two main reasons to finance are:
Different types of financing
There are multiple types of financing to consider, depending on the company’s IT project. The main difference between these options is whether a company wants to own or just use an asset. Some of the types of financing also have minimum loan amounts.
Important considerations in financing a project
We’ve financed many projects in our history. We recognise that every company is different, but our experience has helped us identify five main considerations when looking to finance an IT project.
To finance or not to finance?
We know that investing in an IT project is a major strategic decision for a company. As the company goes about its cost and benefit analysis, it must consider different types of financing and the key considerations for each option. No matter which financing option they choose, financing can be a great way for a company to realise tax benefits and better manage their cash flow.
Working with banks, especially those that have relationships with IT companies, may be the best option for many companies. These banks can typically offer more attractive rates and better financing conditions that can help companies no matter what kind of IT project they are trying to finance.
Resources:
https://www.boq.com.au/business/loan-and-finance/equipment-and-vehicle-finance
https://www.ato.gov.au/Business/Income-and-deductions-for-business/Deductions/
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