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Small Business

Square has Loaned Out $100 million to Small Businesses

Payments company Square has paid out $100 million in small business financing to 20,000 over the last year, Square CEO (and Twitter co-founder) Jack Dorsey says in a BuzzFeed interview.

For comparison, this time last year, Whole Foods Markets gave out more than $10 million through its Local Producer Loan Program for small food producers, with the overall commitment of loaning out $25 million.

These loans are disbursed through Square Capital, which opened for business to its merchant customers about a year ago.

The way Square Capital works is straightforward:  You request a certain amount of money, with the promise of paying it back plus a percentage on top, with that same percentage of credit card sales going toward the balance.

So if you were offered and took out a $10,000 loan, you would owe them $11,300 in return — 13% over the initial loan amount — which would be paid back as you go by giving them 13% of your credit card sales, which is done automatically.

Square boasts its percentage-based model is better than most alternatives, since it means customers pay less on their loans when business is slow, rather than a set amount every month.

The loans can be deposited in a bank account as soon as 24 hours after approval. And since their customers are already using Square’s famous credit card reader for smartphones or its cash registers, the company gets its money back without those customers having to do anything manually or pay any monthly bills.

Square won’t say how long it takes people to pay the company back, but it does say that 80% of its customers eventually come back for more cash.

But Dorsey balked when asked if Square Capital’s success, coupled with some of its other small business-friendly software, meant Square was becoming a company that’s aimed at only helping small companies.

“I think a lot of people have seen us in that way because small businesses don’t have tools and we’re definitely serving that. But if we were only focused on small business, we would by definition not be able to grow with them,” Dorsey told Buzzfeed.

April 16, 2015

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