How Point Of Sale Financing Is Crucial To Your Business

Point of sale financing, or POS, is a way to borrow money from your business’s suppliers and have the funds delivered directly to your business account. The loan will be paid back with the money that comes from selling products and services. This is a good way for new businesses to get started without having much money on hand or not having enough cash flow. However, it can help you avoid going into debt for up-front costs that you might not be able to repay. You can use point of sale financing for a lot of different purposes, including paying for renovations or opening your new business. You may even be able to buy expensive equipment and furniture using point of sale financing because it can be used for almost anything you need to start up your business.

How It Works

When you go into a department store and make a purchase with your credit card, then what is happening is that the store has some point of sale financing set up with the company that issued your credit card.

Point Of Sale Financing Is Crucial For Your Business

When you make a purchase for $500, the sales associate will be instructed to take an extra 10% off the top. That amount will go directly to your business account, which can be set up as a separate bank account or an online account that is available on your computer. For example, you might need to buy some inventory for your business or pay employees.

Now suppose you run out of inventory and a client comes in with a large order. You have the cashier ring up the order and then tell the customer that it will be a few minutes while they get more items from the stock room. You run to the stock room, grab everything, and ring up another order with another 10% off, which goes directly to your account. You have enough cash to accept the order and you don’t have to ask the customer to pay for it ahead of time.

The discount that you offer on your products at your business is essentially a way for you to finance your own products. As long as you are paying back the money, then there is no interest on pos financing. Even though they aren’t charging interest, suppliers do require that their money is paid back in a relatively short time frame, often around six months or so. By buying more inventory, you can keep making payments to your supplier until the loan is paid off.

You’ll also be able to pay back this loan quickly because the money comes directly from your supplier and doesn’t have to go through a bank or other middleman. You might be able to get a retail installment loan with your business, but several of these loans come with long-term interest rates.

Conclusion:

Point of sale financing is a good way to start your business and you don’t have to take on a large amount of debt. You will want to set up the loan with your supplier from the beginning so you won’t be paying interest on it. Depending on how much the cash flow from this loan is, you might even be able to buy your own needed equipment or furniture without having to pay a lot of interest.