Tech loan defaults on the increase

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A sharp increase in the number of technology financing loans being written off is leading some bigger IT firms to lend the funds to their customers themselves, the Wall Street Journal has reported.

Last month, some 0.86 per cent of equipment loans – which includes office-related tech – defaulted, up from 0.48 per cent the year before, according to the Equipment Leasing and Financing Association in the US.

This, paired with banks and other third-parties struggling to offer credit, has lead some IT firms to increase the number of loans it hands out to their own customers – helping to keep sales going, but increasing the risk, the paper said.

Cisco, Oracle, and IBM all have financing arms in place, and have lent to their customers before the credit crunch, but all three are seeing increased amounts loaned out lately.

Cisco told the paper it financed $4 billion (£2.6 billion) in sales in the year ending 26 July, up from $2.7 billion the previous year. Oracle helped finance $1.1 billion in sales in the year ending May, compared to $891 million the year before.

IBM told the paper it saw an “uptick” in credit being requested, but also saw its default rate rise to 1.3 per cent last month from 1.1 per cent over the summer.

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