Fintech Payments Square has become the latest player to announce that it is rolling out a loan financing offering to its small business customers.
Square Loans will be the first financial services product that the global tech company has rolled out Down Under.
Founded in 2009 by Jim McKelvey and Twitter founder Jack Dorsey, Square launched its payments platform in Australia in 2016.
The loan service is expected to launch here this quarter, marking the first time it has been available outside the United States.
The product is intended to give Square’s small business customers access to finance quickly and in a simple and fair manner, said Samina Hussain-Letch, Head of Industry and Payments at Square Australia. SmartCompany.
The business uses the data it already has about a business to determine the maximum amount it has.
This figure will then be automatically fed to them through their Square dashboard, allowing business owners to choose whether to request the full amount, less, or none at all – with loans ranging from $ 300 to $ 250,000. .
There is no interest rate, but an upfront fixed fee based on the loan amount and the seller’s risk profile.
Refunds are then considered as a percentage of the company’s daily sales made through the Square payment platform.
“If they have a quiet week, which we know is happening… they reimburse less, and if they have a busy week, they reimburse more,” explains Hussain-Letch.
Typically, Square expects a full refund within 18 months. However, there are no additional fees or penalties if this deadline is not met.
In the United States, the average time to repay a loan is around eight months, explains Hussain-Letch. But, if a seller is in trouble, the team will work with them to change the refund structure and extend the deadline.
Follow the crowd?
The timing of this launch is “really intentional,” notes Hussain-Letch.
As we emerge from the COVID-19 health crisis, businesses are reopening, but face cash shortages.
Originally, the team planned to launch last year, but instead focused on tools to help them run smoothly during the pandemic, supporting contactless pickup and code orders and payments. QR, for example.
Now is the time to give them the momentum they need to emerge from the economic recession, Hussain-Letch said.
And Square is not the only one to jump on this opportunity.
Over the past two weeks, Zip Business has launched a new Buy It Now, Pay Later style product offering small businesses up to $ 150,000 in credit. And, MYOB announced a strategic partnership with fintech Butn to offer invoice financing to SMEs.
This is all the activity that Hussain-Letch monitors. And she, for her part, welcomes the competition.
“There is a lot of movement in this space and we expect to see a lot more,” she notes.
Small and medium-sized businesses have always been underserved, she says. Square’s own research suggests that salespeople under the age of 40, and women in particular, find it particularly difficult to access capital.
The more offers that meet different needs, the better.
“If sellers have options, that’s really good for them.”
There is, of course, a lingering question as to whether more debt is what small businesses need after 12 particularly tough months.
Again, Hussain-Letch highlights the research, saying it’s something she and her team know Square customers want.
The data to which they have access also allows them to gain insight into the performance of each business and accurately assess whether they are in a good position to take out a loan.
Being a responsible lender is important to her, she says.
“We are not there to offer loans, we are there to help sellers develop their business,” underlines Hussain-Letch.
“Doing this responsibly is absolutely essential to the way we have designed this product. “