04 August 2015

Square moves into small biz lending

28 May 2014  |  6638 views  |  0 square stand

Payments firm Square is moving into the lending business, offering its merchant customers cash advances.

Square Capital is aimed at small businesses that face a tough time going through the arduous process of getting capital from traditional lenders.

Because the service is only open to merchants that use the Square Register technology, there is no application process - Square bases its decision on whether to lend and how much to advance on the processing volume and history data it holds on its users.

Firms get the money as soon as the next day and the money is then automatically paid back - along with a flat fee - as a set percentage of daily card sales. Although Square says that it expects sellers to pay back the loan in around 10 months, there are no penalties if it takes longer.

The service has already been trialled by thousands of merchants during a pilot programme that saw tens of millions of dollars advanced. A survey of those that used the service shows that 85% are "extremely likely" to recommend it.

The move into lending could prove more profitable than payment processing. Earlier this year it emerged that, despite revenues of $550 million, Square posted a loss of around $100 million in 2013 as it struggled with the thin margins on the 2.75% fees it charges merchants
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