Cisco, the massive computer-networking specialist, has come up with a financing scheme aimed at improving its dealer network's access to trade credit.

The scheme involves pumping US$750 million in short-term capital into Cisco's dealer network for resellers to tap as an alternative to letters of credit (L/Cs).

Capital injection

Cisco says that of the US$750 million it plans to inject into its dealer network, a US$250 million risk credit line will come from Cisco via 30-day open account terms.

The remaining US$500 million will be pumped into the network by Cisco Capital through third-party finance partners in the form of inventory and short-term project finance programmes.

L/C constraints

The capital injection aims to expand the credit capacity of qualified Cisco dealers and enhance the terms and reach of programmes currently offered by third party financing partners.

The scheme specifically targets dealers in the Middle East that according to Cisco are constrained by conventional L/C-based financing strategies.

Cisco explains

President of Cisco's operations in Europe, Middle East and Africa, Rob Lloyd explains what he perceives to be the benefits of the scheme compared with L/C financing:

"I will be very clear in saying that one of the key areas that will benefit from the US$250 million risk credit line will be the Middle East. This is a constraint with the L/Cs and many of the processes that we need to go through because of the emerging nature of the market; because of the differences in currencies, because of export and on and on and on - it is complex. So we think some of the key beneficiaries of the US$250m risk trade credit facility will be partners in the Middle East."

Additional funds

Cisco believes that the additional funds will enable its dealers to better manage their cash flow and penetrate new and wider markets, thus enabling them to sell more products.

Cisco Capital has also announced the introduction of a new simplified leasing programme, also designed to improve its dealers' choice of trade financing instrument.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.