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Federal
Government Financing:
What Is a
Federal Lease?
A lease is an easy way to give your Federal Government customers the
benefits of your products while meeting their budget requirements.
Leasing allows for low periodic payments, which means you can help your
customers focus on the quality and service rather than on the price.
Leasing is a valuable sales tool that will help you to provide flexible
solutions and upgrades via Technology Refreshment for Federal Agency
needs.
A Federal lease must conform to the Federal Acquisition Regulations or
GSA Schedule terms for leasing, which provide the Government the
contract’s underlying legal rights including Termination for Convenience
and Fiscal Non-Funding.
EBA is offers two Federal lease products: LTOP – Lease to Ownership Plan
where title passes upon the final payment; and LWOO – Lease with Option
to Own. Step Leases and Technology Refreshment Leases are included in
all options. At the end of the LWOO lease period, the Agency has the
option to either buy the product, extend the lease or return the
product. Technology Refreshment/migration/ upgrade is permitted and
encouraged in all these solutions.
Why consider this approach on Federal Government Transactions?
The Federal
Government will spend 54 Billion on IT in 2003, which is expected to
increase by 20% in 2004. The Federal Government has streamlined the
financing process and incorporates financing terms into all contract
vehicles. (Let’s add this)
How Do
Federal Customers Benefit From Leasing?
Capital Conservation
Leasing lets your customer keep capital funds free for other purchases
that may not be available under a leasing alternative. If the lease is
an LWOO type lease (vs. Capital Lease) the Agency must utilize funds
from annual operating & maintenance (O&M) funds to make the periodic
payments. Conversely, if the lease is a LTOP type lease, the agency must
use capital funds to make the periodic payments
100% Financing
Leasing means no down payment unless it is advantageous to your
competitive solution. Installation, software, maintenance, taxes,
shipping charges, and any other professional services costs may be
included in the periodic payments.
Budgeting Advantage
Leasing guarantees a level payment amount for the length of the lease
term, which makes it easy for the Agency to forecast expenses. It also
allows Agencies to obtain unplanned-for equipment, since their operating
budgets easily can accommodate a periodic payment increase, whereas a
capital budget often cannot be increased for an additional outright
purchase. Also address the extra paperwork to justify the capital
increase in the Agency fiscal budget whereas the O&M budget may be
easier to obtain.
Pay As You Go Advantage
Leasing means that your customers can pay for the software as they enjoy
the benefits of using it. Leases then are renewed each fiscal year. They
may terminate the lease under the Government’s rights of Termination for
Convenience and Termination for Fiscal Non-funding. The financing agent
bears the aforementioned risks and not you.
How Leasing Helps the Best Value Decision
Of all the obstacles you face when selling, price is the most
formidable. In the final analysis, the sale always depends on your
customer's willingness or ability to pay the price you're asking.
However, you can easily change price from a barrier that blocks sales
into a tool that closes sales.
Further,
financing can greatly increase the amount of product that Federal
Agencies can purchase upfront, and is acceptable as a budget management
tool.
Close Sales Easier: Avoid price objections
Cash purchases may be the simplest method of payment, but it also may be
the most difficult sale for you to close based upon an inadequate
budget. Cash flow is a key concern for any Agency. You must remember
that your proposal is competing for funds with other Agency
requirements. By offering a low periodic lease payment, you are showing
your customer how to make the acquisition easy and affordable. Leasing
reduces “sticker shock” and the resulting price objections. Remember, an
Agency really benefits from the use of software, not the ownership of
it. It will also offer a competitive advantage over your competition.
Enjoy Repeat Sales: Make it easy for your customers to add software
Leasing supports your long-term relationship with your customer
throughout the life of the lease. This allows you many opportunities
during the lease term to touch base with your customers and enhance
their capabilities by adding new products, as their requirements change
and grows.
Close Sales Faster: Provide one-stop shopping
When you offer leasing as part of your recommendation, you are providing
one source, point-of-sale service. Instead of delaying decisions in
order to investigate financing sources, your customer can comfortably
say “yes" now.
Close Competitive Sales: Minimize a competitor's price advantage
You can assume your customer is also reviewing software proposals from
your competitors. Leasing minimizes any purchase price advantage
competitors may cite. By comparing costs on a periodic payment basis,
you reduce the disparity between the cost of your software and the cost
of your competitor's software.
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Termination for Non-Performance
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Termination for Non-Appropriation
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Termination Non-Renewal
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Termination for Convenience
Like any unique
business model—making EBA an integral part of the sales process with
increase your success.
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