Channel finance versus open account: How to choose the right model

By Claudio R. Cury, Managing Director, Wells Fargo

If there’s an industry known for constant evolution, technology certainly qualifies. IT manufacturers pride themselves on smart, agile, and inventive business practices, with sleek and powerful new solutions launching almost daily.

Yet there’s one aspect of the IT sector that remains stubbornly constant: selling only through open accounts.

OEMs of hardware and software—even IT providers of managed services and cloud solutions—all experience this situation. While the company modernizes other areas of the business, legacy practices persist in sales and finance. An over-reliance on open account sales is one example.

The pros and cons of open account sales

Open account sales enable channel partners (and large corporate buyers) to purchase directly from a manufacturer, then pay with terms set by the manufacturer, typically ranging from 30 to 60 days.

It’s a financing option that often makes sense early in a manufacturer’s lifecycle as OEMs establish themselves in the market. Open account financing is easy to set up, well understood in the channel, and provides a high degree of control to the OEM.

But, as an IT manufacturer’s business matures, a rigid adherence to open account sales can actually slow channel growth. That’s because distributors, value-added resellers (VARs), system integrators, and others in the channel also need to optimize margins and liquidity. The lack of flexibility in open account arrangements can backfire, causing channel partners to promote competitor products with more favorable terms. 

An over-reliance on open account financing can also impact an OEM’s working capital, cash flow, and credit capacity. This scenario often occurs when direct sales (such as those from hyperscalers) comprise a sizable portion of a manufacturer’s pipeline. It’s also prevalent in sectors with lengthy payment cycles, like healthcare or government, or regions outside the U.S. with different trade practices. In these instances, IT manufacturers can find their valuable cash tied up. This can stall growth, prompt greater use of credit lines, and constrain credit capacity unnecessarily. 

Despite these limitations, numerous OEMs insist on open account programs across their products and channels. They appreciate the simplicity and control offered by this model.

The advantages of flexible channel finance programs

Channel finance programs offer an alternative—one that benefits the OEM and its valued sales partners. With channel finance, a bank such as Wells Fargo acts as an intermediary during the sales cycle. OEMs benefit from more certainty in their cash flow. Channel partners appreciate more flexible terms and greater negotiating power with their own clients.

Today’s channel finance programs are highly customizable to each OEM’s needs. For example, IT manufacturers can adjust terms, cost, and other variables as company priorities and cash flow needs change. There’s greater certainty around payment timing, which enables OEMs and channel partners to manage cash flow more strategically and with less stress.

Channel finance provides an attractive balance to the demands of direct orders by hyperscalers, which can constrain resources for OEMs and impact channel sales. Analysts expect hyperscaler spending to reach almost $250 billion in 2026—up from $197 billion in 2024.1 It’s a trend spurring more OEMs to consider adding channel finance for one or more of their product lines.

Another advantage of channel finance lies in global trade, where OEMs can have far less clout to dictate terms. A channel finance program can streamline international expansion and reduce risk, especially through a bank with a vast network of global relationships.

Four questions to end the channel finance versus open account debate

Still debating channel finance versus open accounts? Consider these four questions. All provide strong reasons to add a channel finance option for future IT sales.

1. Do you have product lines that would benefit from additional sales?

Channel finance is a proven technique to fuel sales. It arms distributors, resellers, and system integrators with yet another reason to promote an OEM’s solutions to end users. It’s a smart strategy for a high margin product, a go-to-market (GTM) campaign, or when entering a new market.

2. Are you ready for a competitive edge with our channel partners?

The increasingly global IT marketplace can make it more difficult to stand out. Helping valued channel partners improve their margins and optimize cash flow makes it easier to say “yes” to sales of your solutions. 

3. Can additional working capital help you achieve company goals?

From researching new products to expanding to new markets, from paying down credit lines to acquiring new businesses, there are a number of ways for OEMs to put excess liquidity to work. Channel finance shifts the credit burden away from the manufacturer and frees up cash for other opportunities.

4. Are you adding staff and infrastructure to manage “bank” functions?

At most manufacturers, developing IT products is a core competency—not running a financing platform. But the larger your portfolio of open accounts, the more OEMs need to invest in infrastructure, staff, and training for everything from invoicing to collections. Channel financing streamlines growth by putting the resources, expertise, and highly skilled team of your bank to work for you. 

Choose a channel finance provider with a tenured team, global reach

As you explore when and how to launch a channel finance program, reach out to a financial institution that understands the IT industry and maintains expansive channel relationships around the world. This specialization and experience give you the bandwidth for today’s sales—and tomorrow’s possibilities.

As a market leader with more than 25 years of experience, relationships across over 1,000 channel partners, and trading in 19 different currencies, Wells Fargo offers a worldwide lens and broad network that can help IT providers to thrive. Our strength and stability, dedicated industry team, and top-tier technology help us offer channel finance programs suited to all types of situations.

Contact your relationship manager to learn more.