Square Capital: Learn All You Need to About Small Business Loans

Square Capital is owned by Square Inc. and was first launched in 2014. It focuses on providing unsecured business loans to small companies.

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    It is important to note that in order to even be eligible for Square Capital small business loans, a merchant must be already using Square’s point of sale software. Originally, the company focused on offering flexible merchant cash advances. However, in recent years, the focus has shifted towards providing loans that have a fixed term. In order to hand out these loans, the company has partnered with Celtic Bank.

    The primary objective of the company is to provide business financing that helps smaller organizations grow more rapidly. Square Capital offers loans in the range of $500 to $100,000 and has already funded more than 150,000 merchants and disbursed more than $2 billion.

    The different types of small business loans that are offered by the company are aimed at providing quick financing to small firms. Square loans can be repaid over a term of up to 18 months and the borrowing costs range between 10% and 16%. 

    What Loans For Square Capital Offer

    The type of financing offered by Square Capital can be termed as a merchant cash advance (MCA). There are two reasons for this classification. First, you need to be an existing merchant of its other services in order to qualify for the loans. This means that only those small businesses that are already customers can use them.

    Second, the way in which the loan process works makes it even clearer that the type of loan is an MCA. The loan allows your business to receive a lump sum amount upfront. However, the payback terms are slightly different compared to a traditional fixed-term loan. The repayment process takes place via your debit and credit card sales.

    How Square Capital Works

    The way this financing method works is straightforward. You need to have an existing merchant account and fulfill the eligibility criteria related to documentation and business size.

    Once you are eligible, you simply need to apply for a Square business loan that you will receive in a matter of days. However, it is worth noting that the payback process is slightly different compared to regular business loans. Rather than paying interest on the loan that you have borrowed, you give the company a fixed percentage of your daily debit/credit card sales.

    In addition to this, you can also repay the loan early, although this does not provide much economic benefit. There are no prepayment fees but you will not save much money because you are paying a fixed percentage of your daily sales as a fee anyway. At the same time, you must also pay out a fixed percentage that may eat into your daily revenue.

    How Do I Qualify For Square Capital?

    In order to qualify for the loans, you need to have an existing merchant account with the company. Additionally, you must also be generating revenue of above $10,000 per annum. Furthermore, you should also be processing your business payments via the company’s point-of-sale solutions on a weekly basis. If you meet all these three conditions, then you can simply log in to your existing account and apply for the loan.

    Advantages and Disadvantages

    Like any form of financing, there may be certain advantages and disadvantages of taking a loan from Square Capital. Depending on your business, strategic plans, and other considerations, these points could impact your decision-making process.

    Advantages

    • Easy Application Process: The company will offer you a loan option in a proactive manner. You do not really need to search for the different types of loans and then choose from them. Additionally, the application process can be conducted online, making it much more convenient for your business.
    • Quick Disbursement: This advantage arises because you will be already registered as a merchant. This will cut down on time taken to hand out the loan to your business. In general, MCAs tend to be handed out much faster, and this is certainly true in this case.
    • Clear Information: The information provided by the company on its website is presented very clearly. The terms of the loan will also be shared with you after you apply for it. This is a big advantage as you are not likely to face any major challenges in terms of informational transparency.
    • No Prepayment Fees: If you choose to pay back the loan before the end of its term, there are no prepayment fees. This is a major advantage because traditional loans tend to have prepayment fees associated with them, putting your business in a dilemma whether to prepay it or not.
    • No Late Fees: In addition, there are no late fees either. This is because the entire payback mechanism is based on a fixed fee to be paid out of your debit/credit card sales. Even if you are not able to pay back your loan as per the original schedule, there are no late fees.
    • Automatic Payback: The payback process is fully automated because it is directly linked to your point of sale system. This means that you do not have to worry about writing checks or visiting the company’s office. An automated process makes the entire borrowing experience much smoother.

    Disadvantages

    • High APRs: The annual percentage rate (APR) that is applicable to this financing is relatively higher compared to traditional business loans. This is because the terms tend to be shorter. A shorter-term means that the interest and fees are not too spread out and may end up costing you more.
    • Less Responsive Support: Another key disadvantage is that this lender’s customer service is not very easily accessible and responsive. The company has a reputation for not responding to customer requests in a timely manner. This means that your queries may take some time to resolve.

    How Do I Apply?

    In order to apply for a Square Capital loan, you need to click on “Capital” and select the option to “Take a Survey”. Fill in the details, and if you are eligible for a loan, the company will alert you via your account. If you meet all the criteria, the loans offered by the company are typically handed out in a matter of days rather than weeks.

    Documents I Need To Apply

    Since it is mandatory to be an existing merchant, your information is already shared with the company. However, you may need to furnish three additional documents. These include a valid US drivers’ license, a business tax return, as well as business invoices. Such invoices may be in the form of purchase orders or receipts.

    Square Capital For Bad Credit

    It is also worth noting that you can borrow Square loans even if you have a bad credit score. You can get an offer from the company even if you have a bad credit history and this is certainly an attractive proposition for a lot of small businesses.

    Square Capital Customer Support

    This is one area in which the company lags behind its competition. The customer support provided by the company is not up to the mark. Customer queries directed to the Square Capital phone number could take a long time to be resolved. In addition, the resolutions provided by its team are not always satisfactory. 

    Conclusion

    If you are an existing merchant of Square., then these loans could prove to be highly beneficial for your business. You can gain access to funds quickly, automate the payback process, and avoid the hassles of prepayment penalties. However, you also need to be conscious of higher APRs and customer service which exhibits significant room for improvement. If these two areas are not your priority, then Square Capital loans might be the ideal financing choice.