A Loan against Point of Sale (POS) machine is a financial product offered by various lending institutions in India. It is a quick and convenient way for small and medium-sized businesses to access short-term funding. POS loans are similar to merchant cash advances, and provide businesses with immediate cash flow.
Here, the POS system is a key element, as lenders recover the outstanding credit via the payments made through the point-of-sale machine. This type of loan is typically used to purchase inventory, pay bills, or cover unexpected expenses.
To know more about the loan against POS machines and for answers to the question, “What is POS in banking?” read on.
Point of Sale (POS) systems are a critical component of any retail or hospitality business. These systems are designed to manage and streamline selling processes. The POS system typically includes two components – hardware and software.
Hardware components include such as a cash register or a touchscreen. Software components enable inventory management, customer tracking, and financial reporting. These pointers cover the basics of the POS payment meaning, and it helps to know about it.
Additionally, a POS system can include features such as barcode scanning, credit card processing, and customer loyalty programs. These systems are used in a wide range of businesses, from small retail shops to large department stores and hotels.
With the integration of mobile payments, POS systems are now more advanced and more efficient than ever before.
The POS systems seen in retail outlets today are quite advanced. They are loaded with features, allowing business owners to offer their customers a wide range of perks. Some of these include:
Keeps track of stocks and quotations
Manages inventories and processing sales
Maintains customer invoices and supplier records
Assists in the issuance of procurement orders
Eliminates the burden of maintaining price tags
Creates barcode labels covertly
Advanced bookkeeping methods
Generally utilised in retail establishments such as stores, kiosks, and hotel receptions
Records and executes transactions that occur during the sale of services or goods
Before understanding how to avail credit card merchant loans, learn about the key parts of a POS system. They are as follows.
Electronic point of sale or EPOS interface
Drawers for cash and cards
Display device that displays the invoice
Card reader or machine
The loan against POS system is a type of merchant cash advance loan. Here, financial institutions provide credit based on the volume of business generated at the POS terminals. Lenders can make POS loans of ₹2-₹5 Crores for a duration of up to three years.
As POS loans are dependent on monthly card swipes, lenders often provide competitive interest rates as low as 1.5% per month and hassle-free processing. Furthermore, loan repayment methods are convenient and flexible. Loans against POS equipment can be used by small businesses, microenterprises, entrepreneurs, and retail merchants to launch new ventures or run current ones.
The liberty a POS loan provides businesses to start a new line of credit under a parallel credit system is what makes it so dependable. The daily EMI payments are based on the income made that day; therefore, the debited amount varies according to your daily income.
Some top banks and non-banking financial companies (NBFCs) that offer loans against point of sale (POS) machines include:
Kotak Mahindra Bank
These financial institutions offer different interest rates, loan amounts, and terms. So, it is important to compare the options and choose the one that fits your needs best.
The fundamental principles are constant, even if the eligibility requirements for various lenders may vary. These generally are to do with the quantity of POS transactions. The eligibility rules can be characterised as follows based on the basic characteristics:
Minimum 1 year worth of business operations.
Card transactions start at a minimum of ₹50,000 per month.
Minimum six-month usage of POS.
ITR for two years if the turnover exceeds ₹10 Lakhs.
The documentation to apply for a loan against a POS system differs depending on whether the organisation is a limited corporation, a partnership, or a sole proprietorship.
Passport, driving licence, voter ID, PAN card, Aadhaar card of guarantors or the borrowers and the company's PAN and Aadhaar
Borrowers and guarantors' voter ID/Aadhaar Card/Passport/Driving License/Utility Bill
Bank Statement from the previous six months displaying the revenue from POS transactions, last 12 months’ Statement of credit card sales, Last three years' audited balance sheet, ITR, and profit & loss account, Performance proof for the current fiscal year and projected turnover
For sole proprietorship: Number of Stores Registered for Sales Tax, VAT, and GST
For partnership firms: Partnership Agreement and Letter
For a company: Articles of Association, Memorandum, and Certificate of Incorporation
There are two ways to apply for this credit facility, which include online and offline applications:
Visit the lender’s portal.
Enter important personal and business information along with the POS details.
Complete the application by providing the data appropriately.
Wait to get the loan processed by an authorised representative.
Get the funds disbursed on approval.
To apply for a loan against a POS system offline, simply visit the physical branch of the lender with all the required documents. The lender evaluates your application, verifies the documents and then approves the loan.
Repayment is simple as it eliminates the tedious process of EMI repayments. Repayment is handled instantly through daily POS machine transactions.
You can benefit from a POS system in the following ways:
Monitors sales patterns, price, gross income, and inventory levels across all locations
Manages stock to generate product variants
Uses a special serial number to identify inventory items
Creates a single order that combines orders and purchases
Assists in the digital scanning and counting of items
You get instant access to funds and are not subject to the daily automatic repayment.
You can get a credit limit of up to ₹50,000 up to ₹1 Crore.
The loan against POS can be useful if you’re looking for financing for business expansion or to increase working capital. It is a safe, flexible, and simple way to run a parallel line of credit for your business.