With waves of rapid digitization and urbanization sweeping across the nation, a large number of business owners are turning towards the adoption of point of sale (PoS) systems. A rapid spike is being witnessed due to an increase in cashless transactions. Moreover, the reduction in operational expenses and a boost in sales is encouraging more and more businesses to adopt PoS systems.
To fuel this growth several non-banking financial institutions in India have started lending credits based on the monthly revenues generated through PoS systems. The lender evaluates the creditworthiness of the borrower based on the transaction history of card swipes achieved through the PoS device. Also, the maximum loan amount to be disbursed is decided on this. Further, the lenders assess the information about monthly PoS sales data of borrowers through PoS device payment aggregators. Based on the financial records revealed working capital loans are sanctioned to borrowers. However, apart from this, lenders also gauge the loan eligibility of borrowers depending upon other factors.
Things You Should Know About Point of Sale Finance
1) No Collateral required
Unlike traditional business loans, PoS financing does not require you to have collaterals. A business owner can apply for these loans to meet their working capital demands without pledging any assets. Thus, these loans provide an opportunity for business owners to raise their capital just by promoting the cashless transactions.
2) Installation of PoS Machine is not a Prerequisite
The government of India has been undertaking various initiatives in the wake of promoting cashless transactions. Considering the fact, several NBFCs have started to offer loans against PoS machines to business owners who are yet to deploy PoS solutions. Most of the lenders help the retailers’ setup PoS solutions through their PoS vendor partners. Moreover, the benefits of PoS/EDC based financial solutions can also be acquired by seeking the installation of PoS systems through a preferred PoS provider.
3) Easy Repayment Options
By availing credits through PoS financing you need not worry about monthly repayment of fixed EMIs. Most of the NBFCs allow the borrowers to repay their PoS based loans by opting for daily installments. These loans are short term and can be paid over 12-18 months. This method of payback provides huge flexibility and ease to small business owners who are subjected to experience seasonal variations in sales. Furthermore, the provision of multiple daily repayments allows borrowers to pay off debt without impacting the cash flow.
4) Fast Loan Approval
Another huge benefit of PoS based loans is quick disbursal. With several lending options available many financial institutes guarantee quick approval to garner the attention of small business owners. These loans can be sanctioned within hours. However, the interest rate levied on these loans may differ from lender to lender. Overall, applying for PoS financing can help borrowers meet the immediate financial requirements of their business by evading the lengthy procedure of loan disbursement.
5) Multiple Financing Options
The market for PoS based lending has grown widely. Today, a number of financing options are available. Apart from NBFCs, several PoS machine providers have also stepped into the segment. Business owners can also avail the financing through lending partners of PoS machine providers. Hence, small business owners can deem the opportunity to expand their working capital through multiple options.
6) Credits Disbursed on the basis of Real-Time Data
Contrary, to traditional small business loans where lenders use financial records to evaluate eligibility, PoS based loans are granted on the basis of real-time sales data. The financial institutions consider the applicant’s eligibility and creditworthiness by assessing his/her latest real-time sales data routed through POS/EDC terminals. Hence, by simply persuading customers to make payments through debit/credit card business owners can avail additional credits. Moreover, by encouraging cashless transactions retailers can also be benefitted to avail government incentives.
Since this was a sum up on important aspects of point of sale, now let’s have a look at how PoS financing works and what all do you need to become eligible for it.
Who Qualifies for Point of Sale Finance?
If you have low credit history and your business receives payment through POS/EDC device then PoS based loans could be a solution to your all financing problems. These loans have easy procedure and eligibility standards which include:
The applicant must be 21 years or above.
The business should have a minimum operational history of 1 year.
The applicant must have a registered POS device and accept card payments.
The business must accept minimum card payments of about 50,000 rupees per month.
Documents you need for Point of Sale Finance
The list of obligatory documents required for PoS based loans includes:
- KYC documents of applicant and organization.
- Last 6 months current Bank Account Statement in net banking to be served in PDF format.
- Shop Establishment Certificate/GST Certificate
Hence, PoS loans are the right financing tools for businesses that generate a good share of income through credit/debit card payments. These short term loans can help small business owners meet their working capital requirements by availing credits conveniently and speedily. Furthermore, retailers can easily extend their credit limits by promoting cashless transactions. Even the flexible option of multiple repayments can aid the small business owners to get rid of debt faster. Thus, procuring funds through PoS financing can help business owners grow their business rapidly.