In business and entrepreneurship, getting access to flexible funding at the right moment is often what separates growth from stagnation. Among the tools that have emerged to meet that need, POS lending has gained real traction, because it lets SMEs unlock the value of sales they are already making.
This article explains what a POS loan is, what it offers, and how it differs from POS financing, two terms that sound interchangeable but work quite differently in practice.
What Are The Types Of POS Loans?
There are two main types.
- The conventional loan: the most common type of POS loan. It is offered by banks or other financial institutions and is typically used to fund the purchase of equipment, stock, or other business assets.
- The conditional loan: offered by lenders who work in partnership with manufacturers or vendors, and typically used to fund the purchase of specific products or services from those suppliers.
A conventional loan has advantages:
- Larger loan amounts.
- Longer repayment periods.
- Flexible repayment options.
That said, a conventional loan can cost more than a conditional one, since it comes with stricter conditions and higher interest rates.
A conditional loan has its own advantages:
- More flexible terms.
- Lower interest rates.
- Simpler procedures when buying from the contracted supplier.
But a conditional loan stays limited in both the amounts available and the repayment period.
What Are The Terms Of A POS Loan?
Terms vary from one financier to another, but they generally cover the following.
- A minimum credit score: most financiers require one before granting a POS loan.
- Repayment period: the repayment period on a POS loan can be short or long.
- Cost of funding: this varies between providers. It appears as interest with conventional banks, or as murabaha profit with Shariah-compliant financiers.
- Fees: some financiers charge fees on the loan, such as an administrative fee or an early settlement fee. An administrative fee is charged when you take the loan out; an early settlement fee applies if you pay it off ahead of schedule.
- Collateral: some financiers require security, such as a property charge or a personal guarantee.
Note that the cost of the POS terminal itself is entirely separate from the financing terms. We cover that in our guide to POS machine price and fees in Saudi Arabia.
What Is The Difference Between A POS Loan And POS Financing?
A POS loan and POS financing are both available to businesses to help fund goods or services. There are, however, some key differences between them.
POS Loan
This is a conventional loan provided by a bank or another finance company. A POS loan is repaid in installments, and interest is usually applied. It tends to be a good option for businesses that need funding to buy high-value goods or services and can then repay over a long period.
POS Financing
POS financing is funding granted to businesses and entrepreneurs, repaid by deducting a percentage of the sales that pass through the POS terminals. Murabaha profit is calculated according to Shariah controls and is set out for you in the financing offer before you sign. POS financing is usually a good option for businesses with regular sales through their POS terminals, because repayment moves automatically in step with daily trading.
The qualifying conditions are more straightforward than most people expect, and we break down each one in our guide to POS financing requirements in Saudi Arabia.
The table below summarises the main differences.
| POS loan | POS financing | |
|---|---|---|
| Type of funding | A loan | Murabaha financing repaid from POS sales |
| Cost of funding | Interest is usually applied | Murabaha profit under Shariah controls, set out in the financing offer |
| Repayment | Repaid in installments | Daily deduction from POS sales, or fixed monthly installments as an available option |
| Funding term | Usually long term | Repayment tracks your sales volume, rising in strong seasons and easing in weak ones |
| Suits businesses that | Need funding to buy high-value goods or services and can repay over a long period | Make regular sales through POS terminals and prefer repayment that moves with daily income rather than a fixed installment |
POS Financing Solutions At Alraedah
Alraedah’s POS financing is among the strongest funding options for small businesses looking to grow, expand, and develop. Alraedah offers a straightforward, flexible way to apply and to repay out of your daily sales through the POS terminals, so you can get on with what you set out to do.
POS financing requirements are simple and clear:
- Funding starts at SAR 20,000 and reaches SAR 25 million.
- If you need an amount beyond the usual range, that is not a barrier. Each case is assessed individually.
- You are not tied to fixed monthly installments. The primary repayment method is a flexible daily deduction from POS sales, with fixed monthly installments available for those it suits better.
- Funding of between 20% and 50% of annual POS sales, set by the outcome of your business’s credit assessment.
- You must have had POS terminals for at least 3 months.
- Your business must have been trading for at least 3 months.
- An administrative fee of 2.5% per year of the financing amount, with a minimum of SAR 7,500, plus 15% VAT.
For the full detail, and the situations where this type of funding is not a good fit, see our complete guide to POS financing requirements.
In Closing
When choosing a POS loan, it pays to compare offers from different lenders to find the best available deal. Weigh up your own financial needs: how much you need, the repayment period that works for you, and the cost you can carry, remembering that what you pay to run the terminal is a separate line item from what you pay to borrow, as our breakdown of POS machine price and merchant fees shows. But why go to all that trouble? Here is the shortcut.
Alraedah stands out as a leading non-bank finance provider in Saudi Arabia. Through the financing services it offers, you can secure funding that matches what you are aiming for. So what are you waiting for?
