Square Capital business loans review
Invitation-only funding based on your Square sales — but beware of daily repayments.
- Best for businesses that use Square to process payments.
- Pick something else if you need a large amount of funds.
Shannon Terrell is a writer for Finder who studied communications and English literature at the University of Toronto. On any given day, you can find her researching everything from equine financing and business loans to student debt refinancing and how to start a trust. She loves hot coffee, the smell of fresh books and discovering new ways to save her pennies.
Square Capital is an invitation-only advance on the sales that retailers make through Square’s point of sales system. It’s essentially a merchant cash advance, meaning that you pay a fixed fee rather than interest and repay the funds with a percentage of your daily sales.
Rather than relying on credit, Square Capital mainly looks at your sales history. And with loans as low as $500, it can be an easy option for struggling businesses that need to cover an emergency expense or just want to expand.
But cash advances are traditionally more expensive than other types of business financing — APRs can sometimes reach 300%. And Square isn’t transparent about the costs. Make sure you understand how it compares to other products that your business is eligible for before you sign up.
How much will this loan cost me?
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. It doesn’t disclose the range of fees it charges.
But it shows an example loan on its website with a fee equivalent to 13.5% of the advance. In this example, the business repays the loan with 16% of its daily sales through Square. This is equivalent to an APR of just under 17.4% — high for a business loan, but competitive for a cash advance.
Businesses can borrow between $500 and $250,000 and you must repay the loan in full over 18 months.
How it works
The loan amount, fee and daily repayment percentage are largely based on the sales your business processes using Square. Businesses that process well 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 similar to what it advertises online.
What do I need to qualify?
This loan is invitation-only — you can only apply if you see an offer on your Square Dashboard. You’re more likely to qualify if you meet the following criteria.
- At least one sale using Square’s point of sale system per week
- At least in annual sales on Square
- Have a mix of new and returning customers
What information do I need to apply?
Square Capital generally requires less information than your typical business loan. You need to provide your business’s tax identification number — or Social Security number if you’re a sole proprietor. And you need to give contact information and a state-issued ID for all business owners.
What industries does Square Capital work with?
Square Capital doesn’t explicitly restrict any industries. But you need to make a significant amount of revenue using Square’s point of sale system. This makes it better suited for retailers, restaurants and other businesses that regularly process credit card payments.
What other services does Square provide?
- Square Point of Sale. Square’s point-of-sale software combines payment processing, digital receipts and inventory management to allow for smooth merchant to customer interactions. Square’s point-of-sale system accepts credit cards, cash, checks, gift cards and mobile payments.
- Square Cash. Square Cash is a person-to-person money transfer service that operates through the Square Cash app or by email. Sending and receiving money is free for personal use, while businesses pay 1.5% to receive payments.
- Square Payroll. Square Payroll is a small business tool that streamlines the employee payroll process with digital time cards, online employee accounts, automatic direct deposit and tax filing services.
Pros and cons
Square Capital offers a simple way to get an advance on funds for businesses that might not qualify elsewhere. If it’s not right for your business, consider other providers like Square Capital.
- Loans as low as at $500
- No personal guarantee
- Funding as soon as the next business day
- Invitation-only application
- Not transparent about costs
- Minimum repayments due every 60 days
See other business loan options
Select your annual revenue, time in business and your personal credit score range to compare other options your business might be eligible for.
Is Square Capital legit?
Yes, Square Capital is a legitimate lender. You can view its state licenses online and it takes basic steps to protect your information, like password-protecting your account. All loans are issued by Celtic Bank, which is a member of the FDIC an active SBA lender — meaning that it meets federal standards.
However, there are two red flags. It’s not transparent about costs. And the BBB has issued a warning against its parent company, Square, over its failure to respond to customer complaints.
Square Capital reviews and complaints
|BBB customer reviews||1 out of 5 stars, based on 2 customer reviews|
|BBB customer complaints||3 customer complaints|
|Trustpilot Score||4.8 out of 5 stars, based on 1,179 customer reviews|
|Customer reviews verified as of||12 October 2020|
Square Capital gets mostly positive customer reviews, but reviews of its parent company are nearly all negative. Customers praise how fast and seamless the Square Capital application and repayment process is. But many have had issues with the quality of Square’s customer service. A few also complain about the inconsistency of Square Capital’s loan offers.
How do I apply?
You can only apply online if you’ve received an invitation from Square. Here’s how to get started.
- Log on to your Square account and visit your Square Dashboard.
- If you see a notification to apply for a Square Capital loan, click on the link.
- Review your offer and follow the instructions to fill out an application and submit any documents.
Filling out the application typically only takes a few minutes.
What happens after I apply?
Once approved, Square Capital will send you loan documents to review and sign. You should receive your funds as soon as the next business day.
How repayments work
Square Capital charges a percentage of your daily sales through its point of sales system. But regardless of sales, you must repay at least 12.5% of your loan balance every 60 days. The loan plus the fee is due in full after 18 months.
If your business can’t make the minimum payment based on Square sales alone, it’ll automatically deduct the remaining amount from your bank account.
Watch for new offers while you repay the loan. Square Capital could extend a new loan offer to you once you’re close to repaying your initial loan. If you need access to more funding, you may have the option to take out another advance.
Read our guide to business loans to find out how Square compares to other providers.