Square Capital Review
- Fast application process
- Fast access to capital
- Automatic repayments
- No origination fee
- No prepayment penalty
- Great repayment interface
Square, the most popular and widely known mobile POS on the market, is an innovator in all things small-business and credit-card related. They’ve been the first, or close to the first, to roll out a mobile payments solution, an EMV compliant chip card reader, and, recently, a mobile wallet, among other things. So it shouldn’t come as a surprise that Square has also entered the world of fast, automated business loans.
The mobile processing behemoth took their first stab at business financing in May of 2014. Originally, Square offered merchant cash advances, a type of non-loan financing in which the company collects their money by deducting a percentage of each sale. Recently, the mobile POS changed Square Capital to a loan product; however, in practice, the loan’s rates, fees, and repayment function basically the same as before.
Square Capital is only available to merchants who use Square (or another POS that has a partnership with Square). Because Square is a payment processor, and already has plenty of information on your business and finances, Square Capital does not have an application or an inconvenient repayment process. Square simply extends the offer to you and, if you choose to accept, the funds will be sent to your account.
As of last year, Square Capital was advertising factor rates of 1.10 – 1.16. In other words, you’re looking at paying around $0.10 to $0.16 worth of fees for every dollar borrowed. This is relatively low in comparison to similar borrowers, but can still be a little expensive because you have to repay the funds quickly (jump down to the Terms and Fees section for more information on this topic).
The bottom line is that Square Capital is a convenient and relatively inexpensive source of capital. For the most part, customer reviewers are happy with the service.
However, some customers have expressed frustration because they do not know when they will receive another offer or because they, for some reason, are ineligible for the service. If you are in this situation and need a loan, I’d recommend looking at our favorite Square Capital alternatives.
Interested in the details? Read on!
Square Capital offers short-term loans.
These are the qualifications required to get a loan from Square Capital:
|Time in business:||N/A|
In addition, you must meet these requirements, according to Square:
- Be an active Square user with a growing business
- Have a history with Square
- Have a mix of returning and new customers
Be aware that Square Capital is a bit unusual in that you do not apply for a loan; Square extends an offer if you’re eligible. Check out the Application Process section for more information.
Terms and Fees
These are the rates and fees for Square Capital’s loans:
|Borrowing amount:||$500 – $100K|
|Term length:||No set maturity date|
Maximum of 18 months
|Factor rate:||x1.10 – x1.16|
|Effective APR:||Learn more|
Square does not use interest rates. Instead, you’re charged a one time fee, normally called a “factor rate” or “flat fee” that is paid back over the life of the loan. Be aware that this means you cannot save money by repaying your loan early (which you would be able to if the loan had an interest rate).
According to the Wall Street Journal, the factor rates offered by Square are typically between 1.10 and 1.16, which means that you will have to repay between $0.10 and $0.16 in fees per dollar borrowed. Square will disclose the full borrowing fee before you accept the loan.
Because the loans are repaid by deducting a percentage of your credit card sales (which fluctuate day-to-day), there is no set date on which your loan will be repaid. However, you do have a maximum of 18 months to repay your loan. Furthermore, to keep you on track, you have to repay at least 1/18th of your loan every 60 days. Merchants also have the option of making additional payments or paying off the loan at any time without penalty.
Square periodically reviews user’s accounts to determine if they’re eligible for a loan. If your account is eligible, you will receive an email and a notification on your Square account. You can find your offers under the Capital tab in your account.
Once you receive the alert from Square, getting the money is pretty easy: decide how much you want from the options presented to you and request the money. Square will use all the information they have already to verify your identity and information, though they may reach out to ask for additional documents if necessary.
This lender will not check your credit to make a decision, so you do not need to worry about a credit check affecting your score.
Once Square has verified your information, the money will be deposited into the bank account hooked up to your account. From then on, Square will automatically deduct their cut from any credit or debit transactions you process through their service. If you want to repay part or all of the loan, you can do so via the Capital tab on your dashboard.
Sales and Advertising Transparency
Square provides a fair amount of information via the main Square Capital webpage as well as the Square Capital support center. By reading through these documents, you should have a fairly good idea of what to expect from this service.
Customer Service and Technical Support
Customer service is, and has always been, Square’s weakness. Support for this particular part of their service is no different. Square has drastically improved its customer support in the last few years, but many customers still report difficulty getting in touch with a representative.
There are a few different ways to get in contact with Square, including email, phone, Facebook message, or Square’s twitter support page @SqSupport. Additionally, Square has recently implemented a quality seller community forum, where you can get answers from Square representatives as well as other Square sellers.
Negative Reviews and Complaints
Square Capital has done fairly well in the negative review department.
In general, the complaints about Square’s payment processing service mostly have to do with account stability issues. The good news is that if you qualify for Square Capital, it means the company believes your business is trustworthy and reliable, and thus is unlikely to initiate any actions that might affect the stability of your account.
Complaints specifically about Square Capital are scarce on the processor’s BBB page. Fortunately, there’s another source of customer reviews specifically about the lending service in our comments section below. Here are the aspects of Square Capital service with which customers are frustrated:
- Inconsistent offers: Many customers are frustrated that they do not know when another offer will be extended to them. Because there’s no way to determine when they are likely to receive an offer, merchants cannot necessarily count on having funding when they need it.
- Verification issues: Some merchants have reported that they’ve been rejected because the information they supplied to Square could not be verified.
- Rejection due to unusual account behavior: Square Capital likes to see consistency. If your card processing or bank statements show unusual activity over the last few months, you might be rejected for a loan until you can once again prove a consistent pattern of activity.
- Communication issues: Because Square’s customer service can be difficult to get in touch with, solving problems related to the above frustrations might be difficult.
It’s also worth noting that if you are a business doing well enough to be eligible for this service, it might be time for your business to switch to your very own merchant account. If you accept an advance from Square, you’re tied down until you repay the company.
That being said, if you need short term financing, Square offers a very compelling deal. Sticking around for a few extra months might be worth it.
Positive Reviews and Testimonials
Square has a couple video testimonials on their website and several merchant reviews on their Capital town square page. You can also find a number of positive reviews across the internet, including our own comments section. In general, merchants are happiest with the:
- Convenient lending process
- Fast access to money
- Hands-off repayment method
- Relatively inexpensive fees
As you can see, convenience is the key word when it comes to Square Capital. Merchants like Square Capital because the service makes the lending process easy; once you’ve requested the money, the system will take care of everything else.
If you are eligible for financing, Square Capital is a convenient and relatively inexpensive source of financing. This company has streamlined the lending process so it’s almost completely hands off—you don’t need to fill out a long application or remember to write checks every payment period.
However, Square Capital is not without problems. If you have been denied for a loan or Square Capital is simply too undependable for your business, you do have other options available. You will have to fill out an application, but most of these lenders will be able to give you an estimated quote with very little hassle.