Technology equipment finance

How do businesses finance servers and IT infrastructure?

Software and IT businesses, managed service providers and general businesses typically lease servers, networking and security infrastructure by default, since hardware in this category is superseded quickly relative to a typical finance term. Longer-life infrastructure, such as structured cabling and comms rooms, is a better fit for hire purchase instead. Spend is often triggered by a contract win or a compliance deadline with a fixed date rather than a planned refresh cycle, which puts pressure on timing as much as budget.

Buyers are software and IT businesses, managed service providers, and general businesses investing in servers, networking or security infrastructure. Technology spend in this category is frequently triggered by winning a new contract that requires specific infrastructure or a security accreditation, or by a compliance deadline with a fixed date, rather than by a planned, evenly spread refresh cycle, which means the equipment often needs to be funded and installed on a timeline the business does not fully control.

Leasing is the default fit for IT hardware, given how quickly servers, networking equipment and security infrastructure are superseded relative to a typical finance term, and most businesses benefit from a planned refresh cycle rather than running hardware until it becomes unsupported. Hire purchase suits longer-life infrastructure, such as structured cabling and comms room fit-out, which does not date the same way and is generally kept for the life of the office or facility.

Standard server and networking hardware retains some secondary value shortly after purchase but falls away fast as newer generations arrive, which is one of the main reasons leasing is the norm in this category rather than the exception. Bespoke or highly configured systems built for one specific use case have very little resale value at any point, so lenders assess this kind of equipment mainly on the business's trading record.

The mistake we see most often is financing hardware over a term longer than its realistic useful life, leaving a business still paying for equipment it has already replaced because it could no longer meet current performance, security or support requirements, effectively paying for two generations of hardware at once during the overlap. Checking the stated support and security update lifespan for a specific model before agreeing the term is a simple way to avoid that overlap.

People also ask