While it has been rumored to be in the works for a while already, US payments startup Square has officially announced it’s getting into the merchant cash advance game with a new service called Square Capital.
The program is designed to help businesses grow by serving up quick and easy access to funds “in a way that’s easy to understand”, as the San Francisco-based startup puts it. In short, Square is looking at ways to help smaller, independent companies access capital without months of paperwork and complex application processes. So why would Square wish to do this? Well, so it can sell the retailer its own core service.
Founded in 2009 by Jim McKelvey and Twitter cofounder Jack Dorsey, Square’s software and hardware products are designed to make it easier for merchants to accept credit and debit card payments through their mobile devices (Square Register). But if a would-be retailer doesn’t have the funds to expedite growth, well, Square’s products will have a pretty limited reach.
With Square Capital, businesses can get access to money “as soon as the next business day”, with Square then receiving a set percentage of daily card sales. Square says it expects most sellers will have repaid their advance in around 10 months, though stresses that there is no set time frame – they pay more when business is booming, and less when things are quiet. A percentage is taken from the company’s card sales, and Square tells us that these offers are “unique for each merchant”, so it will vary – however 10 percent should be about the standard. And it’s worth noting that this doesn’t include Square’s standard processing fees.
Square says thousands of sellers have already used the service during the pilot period, using it to procure equipment, inventory, employees, and more. The company has advanced “tens of millions of dollars in capital” already, and adds that it is open to working with existing businesses already using Square.
Meanwhile, you can read more about Square Capital here.