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What Is Point-of-Sale Financing?

February 4, 2022

Point-of-sale financing, or POS lending, is making it easier for consumers to pay without relying on credit cards. According to data from McKinsey , credit originating at the point of sale is set to account for between 13% and 15% of unsecured loan balances by 2023.

Adopting a POS financing model can offer benefits for consumers and businesses alike.

Point-of-sale financing, explained

Point-of-sale financing allows qualified consumers to be approved for credit when they make a purchase, then pay for it over time. In essence, they get a personal loan to pay for a specific purchase. That sets POS loans apart from traditional personal and installment loans.

Point-of-sale financing is often used in retail sales as a financing solution for credit-worthy consumers. But it can also be used in healthcare to make it easier for patients to pay for the care they receive.

POS lending vs. Buy Now, Pay Later

Both point-of-sale financing and buy now, pay later (BNPL) are alternative consumer loans that you can obtain at the time of check-out, but they don't quite work the same.

With BNPL, consumers can break payments into a series of installments. Customers typically make an initial payment toward the balance at the check-out. The remaining balance is then due in typically three installment payments spread out over a period of six weeks.

Buy now, pay later loans are usually used for smaller purchases. POS lending, on the other hand, can be used to complete a large purchase with a longer repayment period.

Point-of-sale financing loans.

  • Can be used to finance large purchases with higher loan amounts.

  • Hard credit check may be required.

  • Monthly payments may be higher and extend over months or years.

  • Late or missed payments may negatively impact credit score.

  • Interest and fees may apply.

Buy now, pay later.

  • Offered at the POS terminal as a financing option for smaller purchases.

  • Soft credit check (or no credit check at all).

  • After initial down payment, three remaining biweekly payments.

  • Late or missed payments might not impact on credit score.

  • May be interest- and fee-free.

What are the advantages of offering POS financing?

POS loans have the potential to yield numerous benefits for your business. Their rising demand among consumers could increase sales and revenue as more take advantage of these type of loans.

Consumers who use POS financing may spend more per order, on average, and may be more likely to become repeat buyers. They might also be more likely to refer their friends, helping drive sales and improving your bottom line.

What types of businesses could benefit from POS lending?

If your customers need a flexible financing solution, POS lending could help your business. A retailer selling electronics, furniture or other big-ticket items, for example, could be a prime candidate.

This payment option can also be useful for businesses in the healthcare, auto and even home improvement space. For example, a fertility clinic may offer point-of-sale financing as a patient payment option to help ease the financial burden for potentially soon-to-be parents, or a general contractor might offer it as a financing option to help new homeowners make a few upgrades to their humble abode.

Should your business offer POS financing?

The answer depends largely on the nature of your business and what your customers need. If you run a retail business and sell higher-priced items or you're in the health and wellness space, then POS lending could make sense. You're more likely to have customers making larger purchases that they may not be able to pay for all at once.

Companies that offer home improvement services or products or automotive servicing could utilize POS loans, too.

How can you offer POS financing?

Adopting POS financing and installing POS software doesn't have to be difficult — and you don’t have to do it alone.

Ally Lending works with you to design a customized financing model that best suits the needs of your customers and your business model. We help launch your POS lending system with minimal effort on your part so you can continue to deliver the same level of service your customers expect.

Consider the possibilities of point-of-sale financing

Consumers want to get the best deal possible on purchases, and they want payments to be as simple and convenient as possible. POS lending can provide both, benefitting your business as well.

Become an Ally Lending provider so that your customers can apply, and finalize their financing in a matter of minutes.

Start Today

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