Before the first credit there are business decisions to make: how much capital you need, where it comes from, who you will buy from and how you will operate. This guide helps you sort them out.
Selling phones in installments can be a good business: the demand is there, many customers cannot pay in cash and the device, when it is properly managed, protects part of the risk. But it is also a business that ties up capital and can lose money quickly if you start without a plan. This article is for people who do not have the store yet or are about to start: the decisions that come before the first credit.
If you already have a store and want to add your own financing, start with how to finance phones from your store, which focuses on policy and operations.
Summary: define your model, work out how much capital each credit ties up and how much you need to sustain the cycle, secure reliable suppliers, formalize the business with local advice, choose tools for administration and device protection, and start with a small volume you can measure.
1. Define your model
There are several ways to sell in installments, and each one has different implications:
| Model | What it means | Main implication |
|---|---|---|
| In-house credit | You finance the customer with your own capital | You need capital and you carry the risk |
| Third-party financing | A finance company lends and you sell | Less risk, less margin and less control |
| Mixed | You combine both depending on the customer | More flexibility, more complexity |
This article focuses on in-house credit, which is the one that requires the most preparation.
2. Understand the capital cycle
In a cash sale, the money comes back the same day. In an installment sale, it comes back little by little, over months. Meanwhile, you have already paid your supplier for the device.
Illustrative example: you buy a device for 200 and sell it in installments with a down payment of 40 and ten monthly installments. On day one you recover 40 of the 200 you paid: you have 160 tied up, which you will recover installment by installment. If you sell 50 devices like this in a month, you need to cover 8,000 tied up in that month alone, plus the running costs of the business, plus the installments that come in late.
That is why your starting capital is not calculated only from the price of the devices: it depends on your sales pace, the down payment, the term and a reserve for late payments.
3. Where does the capital come from?
- Your own capital: the simplest option and the one that puts the least pressure on you.
- Partners: they contribute capital in exchange for a share; a written agreement is a good idea.
- Loans: they let you grow, but they add a cost and a payment obligation that does not wait for your customers to pay.
- Reinvestment: using what you recover to finance new sales, at a sustainable pace.
Whatever the source, check that the margin of the business covers its cost with room to spare.
4. Suppliers
You need suppliers who offer devices of legitimate origin, with a warranty and on a regular basis. Some questions to ask:
- Are the devices new, of verifiable origin and free of locks?
- How do they handle warranties and factory defects?
- Do they give you an invoice and documentation for each device, with its IMEI?
- What payment terms do they offer you?
5. Formalities
Selling on credit comes with legal obligations that vary a lot from country to country: business registration, tax obligations, consumer protection rules, possible requirements for anyone who grants credit, and data protection. Talk to a local legal and accounting advisor before you start. This is also the time to draft your standard contract.
6. Tools
From the very first credit you will need:
- A record of customers, contracts, installments and payments in one single place.
- An MDM to manage the financed devices.
- A communication channel with customers for reminders.
- A cash procedure with receipts.
Starting with organized tools spares you the painful migration of digitizing a messy portfolio later on.
7. Your team
In the first months you may be the one who sells, collects and prepares the devices. Even so, write down the procedures from the start: when you hire someone, they will know exactly what to do.
8. A plan for the first months
- Month 1: a few sales, with strict criteria, to test the whole process.
- Month 2: review what went wrong in sales, enrollment and collections, and fix it.
- Month 3: measure late payments on the first credits and adjust the policy.
- From then on: grow at the pace your capital and your results allow.
Common mistakes
- Calculating capital only from the price of the devices.
- Growing sales faster than your capital can support.
- Starting without a contract reviewed by a local advisor.
- Buying devices of doubtful origin because they are cheap.
- Leaving tools "for when there are more customers".
Frequently asked questions
How much capital do I need to start?
It depends on your sales pace, the price of the devices, the down payment and the term. Work out the capital tied up month by month with your own figures and add a reserve for late payments.
Should I start with entry-level devices?
They usually tie up less capital per credit and mean a smaller loss if a customer does not pay, which makes them a good fit for testing the process. Over time you can expand to higher-end models, on Android and on iPhone.
Do I need a physical store?
Not always at first, but a physical location makes it easier to verify identities, prepare devices and take cash payments.
How Shalom Trust handles it
Shalom Trust brings customers, contracts, installments, payments, collectors and devices together in one platform, and its free plan lets you start with a basic dashboard and MDM management. See the plans and the collections module.
Conclusion
Starting a phone installment business is, above all, a decision about capital and organization. Understanding how money gets tied up, securing suppliers and advice, choosing tools from day one and growing at the pace of your results is what separates a sustainable business from one that runs out of cash.
