Square Ramps Up Its Offering with a Merchant Cash Advance Program
Square, a San-Francisco-based company best known for its mobile-payment processing service, announced today that it is expanding its offerings to include a merchant cash advance program that can get cash in the hands of small-business owners in as little as 24 hours.
Dubbed Square Capital, the program has already advanced tens of millions of dollars to thousands of businesses who process payments with Square. Businesses do not apply for the capital. Rather, Square looks at the financial data of the businesses that use the Square payment processing dashboard and make proactive offers to those businesses that it considers eligible. Thus far, average cash advances have been less than $10,000.
Businesses that have used the Square Capital cash advance program already have used the money for the likes of adding another location, buying equipment or increasing inventory stocks.
Generally, the cash advances are paid back in about 10 months, according to a statement from the company released today. That time frame is flexible, however. Square automatically deducts a portion of a merchant’s sales each day until the capital is repaid. The speed at which the cash advance is repaid depends on how a client’s business is doing. When a merchant’s business is growing, Square gets paid back faster. If sales are slow, Square takes a smaller cut.
The total fee for access to the money has typically been around 10 percent, but that figure fluctuates depending on how long a merchant’s history with Square is and how big a business is, says Faryl Ury, spokesperson for Square. When a merchant accepts the capital advance, Square displays the repayment fee in a fixed dollar figure, not a percentage. That way, the merchant understands what the capital is costing. Also, notes Ury, the merchant cash advance offer is monitored and updated in real time, so if a business grows, so too can its cash advance from Square.
Square’s announcement today that it is expanding its services comes just a month after rumors were rampant that Jack Dorsey’s San Francisco-based company was putting itself up for sale. (Square denied these claims).
Related: Rumors Swirl That Square Is for Sale
It might appear a bit of a desperate reach for Square to be dipping its toe into the lending market, but as Square tells its own story, Square Capital is a logical extension of its core brand: making commerce available and accessible. Providing a mobile option for small merchants to be able to process credit cards was only Square’s first step in overhauling commerce, says Ury. Improving the experience of businesses getting access to capital is one more way that Square is working to improve the process of making commerce available to all merchants, Ury explains.
That expansion of the vision hasn’t been without missteps, though. Square just last month wound down its Square Wallet application, whereby a consumer could pay at a store through payment information saved in a consumer’s smartphone. That application wasn’t ever as popular as it was expected to be and Square ended up pulling it. Rather, Square says it has migrated the features of Square Wallet into Square Order, an app that allows consumers to order, pick up, and pay at local shops, cafes and restaurants.
What’s clear in all the expansions and relaunches, though, is that Square wants to be all things to all small-business owners.
Catherine Clifford is senior entrepreneurship writer at CNBC. She was formerly a senior writer at Entrepreneur.com, the small business reporter at CNNMoney and an assistant in the New York bureau for CNN. Clifford attended Columbia University where she earned a bachelor's degree. She lives in Brooklyn, N.Y. You can follow her on Twitter at @CatClifford.