IBM offers financing for on-demand era

IBM announced a new financing deal for its U.S. e-business hosting customers Tuesday, offering payments spread over a year and a line of credit held in reserve.

Total Usage Financing is "unique, because it's not just financing," Timothy Ohsann, media relations manager of IBM Global Financing, said Wednesday.

"Unlike the normal two-year or three-year lease kind of finance, this is a lease plus an available line of credit. This is the first time we've offered this to customers, as opposed to business partners," he said.

Customers can use the credit to buy IT products from IBM "and possibly other people," Ohsann said. "When they find they need extra servers, for example, they don't need to go and ask for the money, wait for credit checks and so on because it's been prearranged."

Repayments will be spread across a 12-month period and will be tied into the current lease charge "so that you're not paying 10 different loans," Ohsann said.

Interest rates will vary, with volume customers being offered preferential rates. The interest rate on the line of credit will be higher than that for the lease, Ohsann said, "because it's a different type of loan."

The offer is likely to be rolled out to other countries, but is initially only available to U.S. customers. "This is a limited offering to gain experience, until we see how it works for customers," Ohsann said. "We generally have an offering in the U.S. first and then take it elsewhere. It depends how useful it will be in a particular country or geography."

Over 10 percent of IBM's annual profit comes from the Global Financing operation, Ohsann said.

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