📺 Stream EntrepreneurTV for Free 📺

Square Raises More Money to Make Small-Business Loans In April, Square advanced nearly $25 million in capital.

By Leena Rao

entrepreneur daily

This story originally appeared on Fortune Magazine

Entrepreneur

Square, the Silicon Valley payments company, is expanding its loan program to small businesses. The company announced on Tuesday that Square Capital, its loan-making division, has raised an additional investment from previous backer, Chicago-based Victory Park Capital (which tripled its original investments) and new investor Colchic Capital.

Square, co-founded by Twitter's Jack Dorsey, says that its Capital arm has been growing at a fast clip. It has loaned more than $100 million to more than 20,000 businesses over the past year. In April, Square Capital advanced nearly $25 million in capital.

Square Capital aims to provide loans to businesses that are unable to secure loans from traditional financial institutions. To evaluate whether a business qualifies for a Square Capital loan (and what its fee structure should look like), Square evaluates its sales data and cash flow, among other information.

After a loan is made, Square recoups the money as part of future card sales. For example, Square may offer a business a $10,000 loan plus charge the merchant another $1,000 in fees, or 10 percent. The business will then have to pay back $11,000 and this money will automatically come out of future card sales using Square over a fixed time. Square says it will take more money out of a merchant's' sales if business is doing well, and will take less if business is suffering.

Square says that 80% of merchants who have completed their first Square Capital advance have applied for a second round of capital.

Square Capital is part of the company's renewed efforts to focus on providing financial and payments services to small businesses. This comes after Square's high-profile deal with Starbucks recently ended—for about two years, the coffee purveyor accepted mobile payments using Square services.

Square also offers peer to peer payments, disputed purchases protection, analytics, and instant deposits for merchants using its Register app.

Square isn't the only company focused on lending to small businesses. Lending Club, Kabbage, and OnDeck all offer similar services.

Leena Rao is a senior writer at Fortune.

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

Editor's Pick

Science & Technology

She Ditched Her Steady Job in Tech to Pursue Her Love of Food. Now She's a Food Network Champion and Celebrated Cookbook Author.

A self-taught vegan chef known for her sustainable cooking practices, Chef Priyanka Naik's journey from the tech world to the Food Network is a testament to the power of passion and perseverance. Hear her insights into how embracing your unique path can lead to entrepreneurial success.

Leadership

9 Productivity Tips That the 1% Know to Follow

Is your inner high-performer waiting to be unleashed? If so, here's what the 1% swear by for peak productivity.

Devices

Save More Than 70 Percent on This iPad Pro

This refurbished iPad Pro comes with 32GB of storage space.

Starting a Business

Ask Marc | Get Free Business Advice From the Co-Founder of Netflix

Get the answers to your most challenging business problems during our next Ask Marc, live Q&A, on 5/9/24 at 2 PM ET. You don't want to miss it—send in your questions now.

Business Ideas

63 Small Business Ideas to Start in 2024

We put together a list of the best, most profitable small business ideas for entrepreneurs to pursue in 2024.

Franchise

Franchising Is Not For Everyone. Explore These Lucrative Alternatives to Expand Your Business.

Not every business can be franchised, nor should it. While franchising can be the right growth vehicle for someone with an established brand and proven concept that's ripe for growth, there are other options available for business owners.