Six years after the financial crisis, it’s still difficult for many small businesses to secure capital. Small-business lending across the U.S. has been sluggish. At the end of the first quarter of 2014, banks held $585 billion in loans to small businesses, 18 percent less than the peak of $711 billion in 2008, according to the Federal Deposit Insurance Corp. In a recent survey conducted by CAN Capital[1], a leading alternative finance specialist, 65 percent of small business owners said that accessing capital is quite or extremely challenging. In a nascent trend that is expected to accelerate, POS providers are partnering with finance companies to ease access to funding.

If POS providers can help address this “pain point,” they can gain a competitive advantage. Surveys confirm that being innovative and expanding offerings can help maintain loyalty. In a 2013 survey by the Electronic Transactions Association (ETA) and Goldman Sachs[2], most respondents said loyalty-based solutions and value-added services are the key to lower attrition and a way to open new revenue streams. At a time when restaurants or other small businesses may see their POS provider as just another commodity service, it’s essential to offer something different.

Harnessing Technology to Help Customers

The good news for POS providers is that they are well positioned to help their customers apply for the capital they need. They can help streamline the process and make it more efficient. How can they do this? It all comes down to data and technology.

POS systems access data on a regular basis in order to process transactions for their customers. They have information on the number and size of transactions, revenue, sales flow, customer loyalty, years in operation and business performance trends. If restaurant owners were to apply for a loan from a their bank or other traditional funding source, they would have to provide all of this data and more.

With this information in hand, the POS needs just one other element – a partnership with a finance company – to help customers begin the application process. With the customer’s approval, the POS provider can share the business owner’s data with the finance company.

This eliminates the need for restaurant owners, most of whom have little time to spare, to take on the onerous burden of collecting, compiling and submitting financial data, a business plan, and other documents. The convenience factor is huge.

Finance Companies Serve Up Restaurant Industry Experience

The process is further streamlined by the fact that finance companies with restaurant expertise already understand the cash flow intricacies (such as seasonality), expenses, and other nitty-gritty financial details of running a restaurant. This helps them evaluate a restaurant’s financial health, prospects for growth and potential to obtain working capital.

Looking solely at the data, a finance company can quickly assess a business and provide an instant quote for how much capital they could receive without receiving any personally identifiable information, alleviating any privacy concerns.

To move the process forward beyond the initial stage, a restaurant owner would then apply by providing minimal additional information. The entire application process is thereby reduced to just minutes.

Three Tips for Creating Successful Partnerships

POS providers who want to explore this value-added service for customers need to carefully evaluate their options. They need to consider how to integrate the service into their business and how to find the right partner. The three tips that follow can help them start off in the right way.

Know your customers and their needs. Take the time to truly understand your customers. Find out about their long- and short-term plans and their goals for the restaurant. Evaluate their position within the competitive landscape. Taken together with the data, this will help you form a clearer picture of which restaurant businesses might benefit from an infusion of capital.
Due diligence is key in finding the right partner. Not every finance company will be the right fit for your business and customers. Some criteria to consider when choosing a partner include knowledge of the customers’ industry, reputation, financial soundness, quality of management, customer service and track record.
Technology brings it all together. Since technology is the critical link, your technology and that of your chosen finance company partner must be compatible. That doesn’t mean you have to be able to fully integrate systems. Also, be sure to consider your future needs. If your customers welcome the service and you believe you can expand it, make sure the finance company you choose can scale with you.

POS providers understand that their industry is undergoing big changes. In the face of competition and new offerings in the marketplace, they need to be proactive. To succeed in a challenging environment, POS providers need to work to help their customers grow their businesses. It appears that the capital crunch will continue for restaurants and other small businesses for the foreseeable future. POS providers who can help their customers access much-needed capital – thereby solving one of their biggest problems – are helping build loyalty and enduring relationships.

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