Does Square Offer Financing? How It Works for Your Business

Square offers financing to eligible businesses through its program known as Square Capital. This program provides a distinctive approach to business funding, differing from traditional loan products. It aims to support small businesses that process payments using Square’s systems by offering accessible capital.

Square Capital Overview

Square Capital is a funding program extended by Square directly to its merchants. Its purpose is to provide capital to small businesses that process payments using Square’s point-of-sale (POS) systems. This service is designed to be a simpler and faster funding alternative for eligible Square sellers. Square Capital is structured more like a merchant cash advance than a conventional loan.

The program leverages a business’s transaction data to assess eligibility and offer funding. It has provided billions in funding.

How Square Capital Operates

Square Capital operates using a repayment mechanism tied to a business’s daily sales. Offers are determined by a business’s sales history and processing volume through Square, rather than solely on traditional credit metrics. The funding comes with a fixed fee that does not involve an interest rate.

Repayment involves an automatic deduction of a fixed percentage from daily sales processed through Square until the advance and fixed fee are fully repaid. The daily amount paid adjusts with sales volume; higher sales lead to faster repayment, while lower sales result in slower repayments. The total amount due, consisting of the advance and the fixed fee, remains constant regardless of the repayment speed.

Receiving a Square Capital Offer

Access to Square Capital is invitation-based, meaning businesses cannot apply for funding without an offer. Square continuously evaluates account activity to determine eligibility for loan offers. This evaluation is based on a business’s sales volume and consistent payment processing history through Square.

Key factors include a minimum of $10,000 in annual sales processed through Square, frequent payment processing, and a healthy mix of new and returning customers. A positive account history with consistent sales and minimal chargebacks also increases the likelihood of receiving an offer. Offers are displayed directly within the business’s Square Dashboard or communicated via email notifications.

Applying for Funds

Once a Square Capital offer is extended, the application process is streamlined. The offer details include the loan amount, the fixed fee, and the repayment terms.

Businesses can review these details and accept the offer, selecting an amount up to their maximum pre-approved limit. Square already possesses the necessary information from the business’s processing history, eliminating the need for extensive paperwork or traditional credit checks. Funds are disbursed to the linked bank account as soon as the next business day after acceptance.

Repayment Structure and Costs

Square Capital loans are characterized by a single, fixed fee rather than a variable interest rate. This fixed fee is determined by a factor rate, which ranges between 1.10 and 1.16, meaning the fee is between 10% and 16% of the borrowed amount. For instance, a $10,000 advance with a factor rate of 1.12 would result in a total repayment of $11,200, making the fixed fee $1,200.

Repayments are automatically deducted as a fixed percentage of each day’s sales processed through Square. While the daily repayment amount fluctuates with sales volume, the total amount owed remains constant. Businesses are required to repay the full amount within an 18-month period. Businesses can track their repayment progress directly through their Square Dashboard.