Online payment service Square has launched Square Capital, a program that provides merchants with financing. Square Capital “eases the complicated process of getting capital to growing businesses,” the company said.
Kabbage kicked off the trend of bringing working capital advances to online merchants a few years ago, and since then, Amazon and PayPal have been among those getting into the business.
Online merchants and ecommerce players are able to cut out the middleman. The advantage to merchants – they’re able to get faster access to capital, presumably at a lower cost. The advantage to payment processors and online marketplaces – higher margins with lower risks than banks, since they take a percentage of payments as they are received from the merchants’ buyers.
“With Square Capital there is no application process, and businesses get their money as soon as the next business day,” Square explained. “Businesses automatically pay Square as a set percentage of daily card sales, so they pay more when sales are strong and less if things slow down.”
Square said thousands of sellers used Square Capital during the pilot program to get access to tens of millions of dollars, which they used to buy equipment and inventory, hire more employees, and add new stores. “More inventory means more sales,” said one merchant in a video Square uploaded to YouTube.
Square said many neighborhood businesses with access to alternative funding sources chose Square Capital for the simple and fast process. More information is available on the Square website.