Taking the Mystery Out of Software Financing and Software Leasing

In the financial world there are many of the changing business finance products. The very terms of leasing "software" and "software financing" are confusing to many businesspeople. This is due to the fact that the software is usually not seen as something that is purchased over time.

This view is shared by both end users and software developers. Companies who think nothing of financing a new car or a computer system will highlight how they will over pay for expensive new business software. And software developers do not see the need to provide software leasing or a software financing option.

But times are changing.

independent equipment finance companies - companies that offer small and medium size businesses equipment financing and working capital - have responded to the need for software financing and software leasing. So, they are starting to include software amongst the equipment financed or leased. There is one big overriding reason for this change:

the high cost of purchasing software

The simple fact is this: Software can be very, very expensive. Often more expensive than the hardware that it runs.

Now, keep in mind that when we talk about software in this way, usually talking about "vertical software". Vertical software is software that is written for a specific narrow industry (this can include industry-specific point-of-sale software, ERP systems, specialized databases, etc). It is not software that is available on the shelf at your local office supply store (the software you see there, and even business applications and operating systems, are "horizontal software" - may be used in various industries, and relatively affordable).

good, clear example of vertical software is auto-parts store - they use software that is specifically written for the auto parts industry. Another example is a local jewelry retailer - they likely use a point-of-sale system designed specifically for the jewelry industry

To understand how software financing and software leasing can positively affect the business, it is important to understand the advantages of vertical software first. Before any form of financing, which may be useful to discuss with your accountant as there are different tax structures that should be considered when dealing with finance / loans in relation to leasing.

That being said, not all programs are available to all candidates. For this reason, it is a good idea to talk with you accountant before applying for financing your business, and then show you consent to the accountant before signing. In some cases, program your accountant wants for you, many will not be available for you, so a compromise will need to be made.