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Point-of-sale (POS) financing helps connect merchants — especially those with high-ticket prices — with customer financing options. If you’re looking for opportunities to get ahead of the competition, offering financing in-house or through a third-party lender could be what your business needs.
Merchants use POS financing to offer customers a payment plan to cover the cost of big-ticket items. Instead of purchasing outright, customers can choose to finance from a third-party provider like Affirm or Klarna.
POS financing essentially modernizes a service that’s traditionally used by furniture and home appliance merchants. Businesses quickly verify a customer’s income and expenses at the point-of-sale to offer credit. If approved, customers are offered a minimum monthly payment, interest rate and enter into an agreement to pay off their purchase over time.
Brick-and-mortar merchants can offer financing through an existing in-store checkout system or tablet, while online merchants can integrate customer financing directly into the checkout page of their online store.
Financing can act as a powerful conversion tool, turning “I can’t afford this right now,” into: “I’ll take it.” This holds especially true for businesses with costly products and services. Financing options give customers that lack upfront cash the opportunity to make a purchase — and increase your sales.
The best candidates for point-of-sale financing are businesses with high-ticket products and services that cost $500 or more. While what constitutes as an expensive purchase varies from customer to customer, whether a customer needs to rely on a credit card to complete the purchase is typically a fair benchmark.
Businesses that sell the following products can benefit from offering customer financing:
As with any lender, the minimum loan amount will vary from one provider to another. You’ll want to try for a minimum that matches your inventory or services, but consider other features to address you and your customers’ needs.
There are two ways to access third-party financing — partnering with a dedicated lender or by using a POS provider that offers an integrated financing feature.
Providers like LendingUSA, Viabill and Afterpay are dedicated customer financing lenders. To sign up, you’ll need to schedule a call or complete an online application on the lender’s website.
Expect to provide information about your business, including your federal tax ID, annual revenue, average ticket price and more. Some providers specialize in online lending, while others offer in-store financing.
LendingUSA point of sale financing
LendingUSA provides a dependable point-of-sale financing solution for businesses.
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It’s also possible to offer customer financing through your point-of-sale provider. This is convenient because it doesn’t require an external application. Customer financing is offered as a bundled feature for all onboarded merchants without any necessary additional software.
While not all POS providers offer customer financing, there are a number of big-name providers that offer this feature, including Square, Shopify and First Data.
Square’s all-in-one processing service is well suited to small businesses that process transactions in person and online.
The cost of using a third-party provider varies depending on the size of your business and your annual turnover. Your provider analyzes your business credentials and makes you an offer based on your circumstances. Merchants may be charged:
Some providers make money by offering interest-free introductory periods to customers that eventually earn interest. Others charge the customer high fees while charging the merchant less — or vice versa. Carefully read through the fine print and compare providers to find the best for your business.
When considering providers, keep both the needs of your customers and the needs of your business in mind.
You can — but businesses that use in-house financing take on the risk of payment plans lending using their money. This type of financing can take time and be risky — especially for small businesses. Not only will you need to vet the customer yourself, but you’ll also be on the hook for missed payments from delinquent borrowers.
If you plan to provide in-house credit to customers, you’ll need to gather the following information:
In-house financing is best suited to large businesses able to take on more risk and devote more resources to a financing department. Explore your financing options with third-party providers before you opt for in-house financing.
Offering customers payment plans for large-ticket items can be a solid conversion tool for buyers who are on the fence. But make sure you weigh your options carefully before committing to a provider.
Choose from several options, but beware of this lender’s fees and poor reviews.
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I’m from Nairobi Kenya, can I apply for a loan?
Hi Rose,
Thank you for reaching out to finder.
Though our Kenya website for finder has no article specific to personal loans that you may be able to take out, you may reach out to local lenders or banks in your area to check your eligibility in taking out a loan with them. Hope this helps!
Cheers,
Reggie