IBM Expands into Accounts Receivable Lending in China

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Jan. 11 – International Business Machines (IBM) has launched a financing business in China indicating how the company is diversifying into service, consulting and financing businesses.

The company’s  first accounts-receivable lending license in the country will apply to the Tianjin Binhai New Area, a special economic zone located in the northeast city of Tianjin. Chip maker and IBM supplier Advanced Micro Devices Inc. (AMD) will be the company’s first client providing accounts-receivable lending or factoring that will give AMD upfront cash payment for sold goods.

Usually a client will take up to four months to pay. Factoring will then allow IBM to give cash worth less than the value of the receivables; earning a cut when the customer makes full payment. IBM spokeswoman Harriet Ip told The Wall Street Journal that the deal would generate “hundreds of millions of dollars” of business for the company this year.

According to Ip, IBM’s global financing unit reported an asset base of  US$36 billion in 2008, with a third of it coming from its commercial financing business, which includes factoring.

There is a possibility that IBM’s  factoring service for AMD could be offered to its other distributors and other business partners reports Reuters. “We have stuck to our core competency, which is IT lending,” said Dan Ransdell, general manger of worldwide client financing for IBM Global Financing told The Wall Street Journam. “We are fortunate we haven’t seen the losses that a lot of other financial institutions have. A lot of the others financed a much broader portfolio.”