Instant Deposit: Square Capital Loan Impact?

Square Capital is a short-term loan service within the Square payment processing ecosystem, offering easy access to business funding for Square users. Square Capital loans are merchant cash advances with a flat fee structure rather than an interest rate, making them more expensive than traditional loans. The loan approval and funding process is simple and convenient, with no credit check required, making it accessible to borrowers with bad credit. While the repayment process is also automated, occurring through a fixed percentage of daily card sales, the high fees and high APR associated with Square Capital loans may be a drawback for some businesses. Instant deposit options may be available, but the typical timeline for receiving funds after loan approval is one to three days.

Square Capital loan eligibility requirements

Square Capital is a short-term loan service within the Square payment processing ecosystem that is available only to Square customers. It is an invitation-only advance on the sales made through Square's point-of-sale (POS) system.

To be eligible for a Square Capital loan, you must be an existing Square customer and have received an invitation to apply. Square Capital mainly looks at your sales history rather than relying on credit. The loan amount, fee, and daily repayment percentage are based on the sales your business processes using Square. Businesses that process over $10,000 a year in Square sales, process every day, and have a healthy mix of old and new customers are more likely to get a loan.

Square Capital loans come with a fixed fee instead of interest, which you repay plus the loan balance with a percentage of your daily sales on Square. The repayment rate is applied to your gross card sales, including tips and taxes paid by your customers using credit or debit cards, ACH payments, and QR code payments made with the Cash App.

To apply for a loan, you must have an offer available on your Square Dashboard. If your business is eligible, you will be notified by email, and you will see the loan offer in the Capital tab of your online Square Dashboard. You will also receive a notification by email and an alert on your Square account. If you are interested in the loan offer, follow the attached instructions, choose your loan amount, and await processing. Square already has much of your information on file, so you will only be contacted if there is missing information. Square does not perform a credit check.

Square Capital will automatically reevaluate your business's offer eligibility, but there is no guarantee of when another offer will be available. Each business is different, and all accounts and locations are reviewed independently.

Square Capital loan repayment process

Square Capital is a short-term loan service within the greater Square payment processing ecosystem that is available only to Square customers. Square Capital loans give Square users easy access to business funding. Square offers business loans to Square sellers to grow their businesses.

The repayment process for a Square Capital loan is as follows:

• Square loan repayment starts two business days after loan origination, and the exact date is reflected in the loan agreement.
• Repayment happens automatically through a fixed percentage of daily card sales, including tips and taxes paid by customers using a credit or debit card, ACH payments, and QR code payments made with the Cash App.
• The repayment rate will be automatically applied to all card transactions until the loan is repaid in full, even when the minimum payment is met.
• A minimum payment of 1/18 of the initial loan balance is due every 60 days, and the entire loan balance must be repaid within 18 months of loan approval.
• If you only make the minimum payment every 60 days, half of your loan balance will be due at loan maturity (18 months) and you may be debited for that amount.
• You can make additional payments to your loan at any time at no additional cost.
• If you choose to repay your loan by check or money order, make all payments payable to Square Financial Services and mail them to the following address: JP Morgan - Lockbox Processing Attn: Square Financial Services - 22402 4 Chase Metrotech Center 7th Floor East Brooklyn, NY 11245.
• You can also contact Square to request a payoff statement, but note that the outstanding amount provided in the payoff statement only reflects your balance at the time specified in the statement.
• If you have multiple Square accounts or locations with outstanding Square Loans, ensure that they are processing payments consistently and are current with loan repayment.

It is important to note that Square Capital loans have a fixed fee structure rather than an interest rate. This means that you pay a fixed fee, which is the difference between the total owed amount and the initial loan amount, instead of interest charges. The repayment rate is applied to your gross card sales in addition to Square's processing fees for these transactions.

Square Capital loan fees

Square Capital is a short-term loan service within the Square payment processing ecosystem, available only to Square customers. Square Capital loans are specifically for businesses that process credit card payments through the Square point-of-sale (POS) system.

Square Capital loans are designed to be paid back within 12 months if the business's payment processing does not change based on initial estimations. The repayment happens automatically through a fixed percentage of daily card sales, including tips and taxes paid by customers using credit or debit cards, ACH payments, and QR code payments made with the Cash App.

Square Capital charges a flat fee structure rather than an interest rate. This means that the borrower pays a multiple of the amount borrowed, with the multiple ranging between 1.1 and 1.16. For example, if you borrow $10,000 at a rate of 1.12, you will owe a total of $11,200 ($10,000 x 1.12). In this case, the loan costs $0.12 for every dollar borrowed. The formula for calculating the total cost is: Total Cost = Borrowed Amount X Factor Rate Multiplier.

Square does not charge any monthly fees, application fees, origination costs, compounding interest, or closing fees. Instead, it charges a flat rate per credit card transaction, which is the same regardless of the type of card used by the customer. The flat rate per transaction is typically between 10% and 16% of the loan amount, with the specific rate depending on the borrower's situation and business specifics.

While Square does not disclose the range of fees it charges, the fee is equivalent to about 14% of the advance, with an APR of about 14.9%high for a business loan but still competitive for a cash advance.

It is important to note that the cost of the loan does not change by making prepayments, and borrowers can make additional payments at any time without additional cost. However, if the minimum payment requirement is not met or the entire loan balance is not paid by the maturity date, the repayment rate applied to daily card sales may increase, and a debit may be initiated from the linked bank account for the remaining amount.

Square Capital loan application process

Square Capital offers business loans to help small businesses grow. The loan application process is straightforward, with no lengthy forms to fill out. Here is a step-by-step guide to the Square Capital loan application process:

Eligibility

Firstly, you must be a Square seller to be eligible for a Square Capital loan. Square looks for businesses that have processed a minimum of $10,000 in the last 12 months, with consistent payment history and regular payment frequency. They also consider the number and diversity of customers, with a mix of new and repeat customers being favourable.

Application Submission

If you are a Square merchant and eligible for a Square loan, you will see loan offers in the Loans tab of your Square Dashboard. You can then choose your desired loan amount and await processing. Square usually already has most of the required information on file, but they may contact you if additional information is needed.

Review and Approval

Once you submit your application, it is sent to the Square team for review. Square does not perform a hard credit check, so your credit score will not be impacted. However, they may perform a soft credit check to evaluate your business for future loan offers.

Funding

Upon approval, Square will deposit the funds as soon as the next business day, or instantly into your Square Checking account. You can then use these funds to increase inventory, buy equipment, hire employees, or any other business needs.

Repayment

Square loans are typically designed to be repaid within 12 months, with repayment happening automatically through a fixed percentage of daily card sales. The repayment rate is applied to gross card sales, including tips and taxes, and other payment methods such as ACH and QR code payments. There are no ongoing loan interest charges, but there is a fixed loan fee that remains the same regardless of the repayment timeline.

In summary, the Square Capital loan application process is relatively simple and accessible for eligible Square sellers. With no lengthy forms or hard credit checks, Square Capital provides an efficient way for small businesses to access funding and support their growth.

Square Capital loan advantages and disadvantages

Square Capital loans are short-term loans designed for businesses that use Square's point-of-sale (POS) system. They are typically repaid within 12 months, although the loan term can be up to 18 months. The main advantages of Square Capital loans are their ease of application and flexible repayment structure, while the main disadvantages are their limited eligibility and potentially higher costs compared to traditional loans.

Advantages

• Straightforward application process: Square Capital loans are only available to businesses that use Square's payment processing services. While this limits eligibility, it also means that Square has access to the business's sales data and can make loan offers directly through the Square dashboard. There is no extensive paperwork or credit check required, and applying for a loan does not impact the borrower's credit score.
• Flexible repayment: Repayments are deducted as a fixed percentage of daily card sales, which means that repayments adjust with the business's cash flow. There is no interest charged, only a one-time flat fee, and borrowers can make additional payments at any time without additional cost.
• Prompt funding: Square is known for its rapid funding process, typically disbursing funds to borrowers' accounts as soon as the next business day after a loan offer is accepted.
• Transparent terms: The total cost of the loan is stated upfront with no hidden fees, making financial planning simpler for borrowers.

Disadvantages

• Limited eligibility: Square Capital loans are only available to businesses that use Square's payment processing services, which may exclude some businesses that do not use this platform.
• Potentially higher costs: While Square Capital loans have a fixed fee instead of interest, the fee may be higher than the interest charged on traditional loans. The fee is equivalent to about 14% of the advance, which is high for a business loan but still competitive for a cash advance.
• Lack of transparency: Square is not transparent about the range of fees it charges, and it can be difficult to compare Square Capital to lenders that use interest rates.
• Poor customer support: Some reviews of Square Capital loans have reported poor customer support and a lack of transparency about the loan process.

Frequently asked questions