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Square Business Loans: 2023 Review

Square loans are repaid using a percentage of your daily sales rather than a fixed repayment amount.
By Jackie Zimmermann, Kelsey Sheehy
Last updated on July 29, 2022
Edited byChristine Aebischer

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Square is now a major player in small-business financing. Since 2014, when the credit card processor began offering merchant cash advances, Square has lent more than $9 billion in MCAs, business loans and SBA loans through the now-shuttered Paycheck Protection Program.
While Square no longer offers MCAs, it does offer fixed-term loans to businesses that use its payment processing services. However, repayment is based on a percentage of your daily sales, which mimics how MCA repayments work. (More on that below.)
Square business loans may be a good fit if you:
  • Use Square payment processing: You have to be a Square customer to qualify for a Square business loan.
  • Process a large, consistent volume of credit card sales: Square business loans are repaid using a fixed percentage of your daily credit card sales. Inconsistent or insufficient sales could leave you with a large sum to pay when your loan matures.
  • Only need to borrow a small amount: While Square offers loans up to $250,000, depending on your sales history, it's best to stick with smaller-dollar loans given the fixed fee and repayment structure.

How much do you need?

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We’ll start with a brief questionnaire to better understand the unique needs of your business.

Once we uncover your personalized matches, our team will consult you on the process moving forward.

Pros and cons

Pros
  • Easy application process.
  • Transparent pricing, no additional fees.
  • No prepayment penalty.
Cons
  • Only available to Square customers.
  • Short terms and small borrowing amounts.
  • Repayment structure can make daily payment amounts difficult to predict.

Square business loans at a glance

Loan amount
$300 to $250,000.
Borrowing costs
Square charges a set fee based on your loan amount.
Repayment
You pay a percentage of your daily sales instead of a fixed amount. The full balance must be repaid within 18 months.
Funding time
As soon as the next business day, once approved.

Square business loan eligibility

Square loans are only available to small businesses that process payments using Square. Eligible Square merchants will see loan offers on their POS system dashboard.
Square considers the following factors when determining eligibility:
  • Processing volume: Businesses should typically process at least $10,000 or more annually.
  • Payment frequency: The more consistently a business processes customer payments, the better.
  • Your customer base: Square wants to see that your business has returning customers and is attracting new ones, too.

How do Square loan payments work?

Square business loans are repaid using a fixed percentage of your daily credit card sales — similar to how a merchant cash advance repayment functions. You pay more when your sales are strong and less when sales are weak.
At least one-eighteenth of your initial loan amount must be paid every 60 days. Payments are deducted automatically from your Square account but may be drawn from your linked bank account if the minimum payment isn’t met. Loans must be paid in full within 18 months — planning your payments ahead of time can help ensure you won't be hit with a hefty remaining balance at the end of the term. For example, if you only pay the minimum every 60 days, 50% of your balance would be due when the loan matures after 18 months.
You can make additional payments toward your loan and prepay it early without a fee. However, Square’s upfront fee means you won’t benefit financially from paying the loan back early.

Reasons to use Square business loans

Easy application process

Square already has access to its merchants' transaction and sales records, which is a major component of most business loan applications. You may be required to submit extra documents, like a government-issued ID or your most recent business tax return, to verify your business identity and history.

Cost transparency

You’ll know exactly how much you’ll owe before accepting a financing offer. While your daily payments will vary based on your sales, your daily repayment rate and total amount owed will never change.

No prepayment fee

There are no penalties for paying off your loan early. Unfortunately, there is also no incentive to do so, as the total amount paid will remain unchanged.

Where Square business loans fall short

Must process payments through Square

Square loans are only available to businesses that use one of Square’s POS systems. While you can sign up for its payment processing, you’ll need to build sales history with the system before you can qualify for a loan. And the lending program alone is not enough to justify switching POS systems.

Daily payments can disrupt cash flow

Similar to the repayment of merchant cash advances, you’ll pay back your Square loan with a fixed percentage of your daily credit card sales. While daily payments could be a benefit for some businesses, they could also throw off your business’s cash flow. Even though the rate is fixed, it could be difficult to predict actual daily payment amounts or how much you'll need to pay off once you hit the 18-month mark. Some small-business owners prefer fixed weekly or monthly payments instead.

Short terms and small borrowing amounts

Square’s maximum borrowing amount is $250,000, which is smaller than loans offered by some other lenders. While the low limit is handy for covering everyday expenses or small inventory purchases, it may not be as helpful for big expansions or major growth opportunities. And if you do receive an amount on the higher end, you have only 18 months to pay it back.

Square loan alternatives

Borrowers with good credit, strong annual revenue, collateral and a years-long business history may find less expensive small-business loans through banks and the SBA. Business owners that don't meet traditional lending standards or have less-than-stellar credit might consider online business loans, though these can carry higher fees.