12 February 2016

Square scores investment to extend cash advance service

19 August 2014  |  5631 views  |  0 Square logo

Square is ramping up its small business financing programme after securing investment from Victory Park Capital.

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 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 it 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.

After a major pilot, the service opened up in May and has already been used to extend nearly $50 million to more than 10,000 businesses.

Square says that the unspecified Victory Park investment will enable it significantly enlarge the programme, extending hundreds of millions of dollars to tens of thousands of additional sellers.

The cash advance service is just one way in which Square has been looking to move beyond its payments roots in recent months. Earlier this year it emerged that, despite revenues of $550 million, the firm posted a loss of around $100 million in 2013 as it struggled with the thin margins on the 2.75% fees it charges merchants.

Last week, in the wake of Amazon's move into its core mPOS market, Jack Dorsey's firm went on the defensive, posting a widely derided blog defending itself against "myths" about its services and financial health.

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