Square Capital Review
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- Date Established
- San Francisco, CA
- Borrower qualifications are lower than banks
- No credit score requirements
- Rates tend to be inexpensive
- No extra fees
- Application process is fast & easy
- Only available to Square sellers
- Low borrowing amounts
- Blanket lien is required (for higher borrowing amounts)
- Customer service is poor
Square, the most popular and widely known mobile POS on the market, is an innovator in all things small-business and credit-card related. It’s been the first, or close to the first, to roll out a mobile payments solution, an EMV-compliant chip card reader, and 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 its first stab at business financing in May of 2014. Initially, Square offered merchant cash advances, a type of non-loan financing in which the company collects its 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 are, by and large, 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 a lengthy 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 & Fees section for more information on this topic).
Ultimately, 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, either because they do not know when they will receive another offer or because they are ineligible for the service for some reason. If you are in this situation and need a loan, I’d recommend looking at our favorite Square Capital alternatives.
Final Verdict: Square Capital is a relatively inexpensive source of capital. Because Square bases borrowing decisions on your cash flow, not your credit score, many sellers will be eligible. However, because Square Capital is by invite only, some Square sellers have complained that the loan is undependable.
Are you interested in the details of Square Capital? Read on!
Table of Contents
Square Capital offers short-term loans, although it’s worth pointing out that Square Capital’s financial product isn’t a typical one; it has some traits of a merchant cash advance as well. Essentially, Square will extend you a lump sum. If you accept, you’ll need to repay that amount plus a flat fee (more on that below) to Square. Repayments are deducted from your daily credit and debit card sales the same as they would be in a merchant cash advance.
These are the qualifications required to get a loan from Square Capital:
|Time In Business:||N/A|
Additionally, 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
The following may disqualify you from receiving an offer from Square:
- Failed debits
- Multiple Square accounts
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 & Fees
These are the rates and fees for Square Capital’s loans:
|Term Length:||No set maturity date
Maximum of 18 months
|Effective APR:||Learn more|
|Collateral:||UCC-1 blanket lien for
loans over $75,000
Square does not use interest rates. Instead, it charges 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 do 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 your 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. To keep you on track, you have to repay at least 1/18th of your loan every 60 days. If your daily card sales cannot cover the minimum amount, Square Capital may debit a bank account you have linked to Square. Merchants also have the option of making additional payments or paying off the loan at any time.
Square does not require collateral for loans up to $75,000. For loans exceeding $75,000, a blanket lien is required.
Square monitors user accounts to determine if a business is 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 funds. Square will use all the information it already has to verify your identity and information, though a rep might 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 its cut from any credit or debit transactions you process through its service. If you want to repay part or all of the loan, you can do so via the Capital tab on your dashboard.
Sales & Advertising Transparency
Square provides a fair amount of information via the main Square Capital webpage as well as the Square Capital support center. You should have a fairly good idea of what to expect from this service by reading those documents.
Customer Service & Technical Support
Although Square’s customer service has been lacking in the past, Square has drastically improved its customer support in the last few years. There are a few different ways to get in contact with Square, including email, phone, Facebook message, or Square’s Twitter support page. Additionally, Square has implemented a seller community forum, where you can get answers from Square representatives as well as other Square sellers.
Negative Reviews & Complaints
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, it’s 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, but you can scrape together some critiques from across the internet. Here are the aspects of Square Capital’s 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 getting 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 tough to get in touch with, solving problems related to the above frustrations might be difficult.
It’s also worth noting that if your business is doing well enough to be eligible for this service, it might be time 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 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 & Testimonials
Square has a couple of video testimonials on its website and several merchant reviews on its Town Square Business Resource page. You can also find a number of positive reviews across the internet, including in our own comments section. In general, merchants are happiest with the following:
- Convenient Lending Process: Almost ridiculously so since Square makes the offer to you.
- Fast Access To Money: You won’t have to wait long to get your money since you’re essentially preapproved.
- Hands-Off Repayment Method: Since qualified borrowers are already embedded in Square’s ecosystem, the loans require very little additional work to implement.
- Relatively Inexpensive Fees: As short-term loans go, Square Capital’s rates are pretty good.
As you can see, convenience is the keyword 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, 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 lengthy 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 minimal hassle.