A steady increase is being noted in the number of business owners using point of sale (PoS) systems to reduce operating cost and increase sales. With more and more businesses promoting cashless payment, several NBFCs in India has started assessing creditworthiness based on the sales routed through PoS systems. A number of NBFCs currently offer Point of Sale finance or merchant cash advance as a modern alternative to conventional business loans. These lenders determine the maximum sanction limit based on the monthly sales routed though PoS solutions. They collect monthly PoS sales data through PoS machine aggregators, and provide working capital loans to borrowers based on their monthly PoS sales. However, the lenders still assess the credit worthiness of a borrower based on a number of factors.
Understanding 7 Important Aspects of Point of Sale Finance
1) Collateral Free Loans
The Point of Sale finance solutions are a modern alternative to conventional business loans. A business owner can opt for PoS loans to raise working capital without using any collateral. He even has option to raise finance according to the monthly sale routed through PoS systems. Hence, a borrower can raise more working capital by persuading customers use to cashless payment options.
2) Multiple Lending Options
A business owner can avail PoS based financing from multiple lenders. He can approach directly to the new age NBFCs who provide business loans based on monthly PoS sales. There are also a number of PoS machine providers who arrange working capital for business owners from their lending partners. Hence, an entrepreneur can also apply for PoS based loans through the PoS machine provide.
3) PoS Machine Installation is not a Prerequisite
There are a number of NBFCs who provide PoS based loans to business owners who are yet to install PoS machines. These lenders help the borrower to deploy PoS system through their PoS provider partner, and then grant loan based on the monthly PoS sales. Also, the borrower can avail PoS based financial solutions through the PoS provider as part of PoS system deployment. However, only selected NBFCs currently provide PoS based loans to entrepreneurs who are yet to deploy PoS solutions.
4) Interest Rate
The interest rate on PoS based merchant cash advance differs from one lender to another. But most lenders charge the offer conventional business loans and PoS-based loans at same interest rates. A borrower with a good credit score can negotiate with the lender for favorable interest rates. Likewise, a business owner routing most of his sales through PoS machines can raise more working capital without using business assets as collateral.
5) Repayment Schedule
Many lenders provide PoS loans as short-term financial products. They require customers to repay the loan over a period of 12 to 18 months. At the same time, certain NBFCs allow borrowers to repay the loan through daily installments. When a borrower opts for daily installments, he has to pay a part of daily PoS swipe to the borrower. However, the tenure and repayment schedule of the PoS loans differs from one lender to another.
6) Credit Score
While processing a PoS loan, most lenders assess the creditworthiness of business owners based on their personal credit scores. Some NBFCs even provide PoS loans only to customers only after performing the credit score check. There are a number of lenders who offer PoS finance solutions only to borrowers with high credit score score. Hence, the entrepreneurs must maintain a good credit score to take advantage of PoS based financing.
Most lenders provide Point of Sale finance to business owners with higher credit scores. But they consider a number of factors, in addition to the borrower’s personal credit score, while processing a loan request. For instance, some NBFCs provide loans to customers who belong to the age group of 23 to 60. Also, they check if the business address or operating address provided by the customer is 100% authentic and well established. However, the eligibility criteria for PoS based loans differ from one lender to another.
On the whole, PoS based business loans enable entrepreneurs to raise working capital based on their monthly PoS sales without using any collateral. A borrower also has option to choose from multiple lending and repayment options. But at present only selected NBFCs are providing PoS based financial solutions in India. The massive popularity of PoS machines will encourage more lenders to offer PoS loans.