If your customers are broke, why not lend them money to buy your products? Microsoft Corp. (NASDAQ: MSFT) seems to think that is a good idea. According to The Wall Street Journal, "With small-business customers finding it harder to finance high-tech purchases, Microsoft Corp. plans to increase the amount it lends them for purchases, by as much as 60%."
The increase in lending would push Microsoft's aid to small businesses up to $1.25 billion this year. With Redmond's huge earnings, a modest default rate with these businesses is not likely to hurt the company, but the questions about the practice go beyond the software company's P&L.
The bad economy will reduce the ability of some businesses, large and small, to spend money on upgrading products and services of all sorts. Should a large company lend money to, in essence, increase its own revenue? Microsoft will be doing just that by underwriting the ability of firms to license its products.
Perhaps banks can pay money to get consumers and businesses to take out loans. On the other hand, since banks don't want to extend credit, they can pay people not to borrow money.
Douglas A. McIntyre is an editor at 247wallst.com.
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Reader Comments (Page 1 of 1)
4-16-2008 @ 4:12PM
Dan Barnett said...
Mr. McIntyre,
Is this any different than Ford or GM financing the purchase of one of their cars? Correct me if I'm wrong, but I thought that GMAC was one of the brighter spots in GM. MSFT could both increase sales & revenue by setting up in-house financing.