The testing began back in May with a small number of merchants. Now the new merchant cash advance program, from credit card reader and online eCommerce services provider Square, is officially up and running.
Called Square Capital, the program seems pretty simple.
According to the company’s website, eligibility is based (obviously) on being a registered Square merchant. But it’s also based on the volume of payments you process and your “history” with the company.
Square says merchants may be invited to participate through their “Square dashboard.” Or they can request more details from the Square sales team if their revenue is more than $250,000 a year. (So this gives you a pretty good idea of where your sales need to be with the company before even thinking about the program.)
This video gives an overview of the way some small business Square customers are already using the program:
Though the terms of the advance will vary based on the specifics of the request, Square does give an example of how the program would work.
Say you ask for $10,000 to help with creating new products for your business. Square would deposit the money in your bank account.
You would then make payments back to Square with a percentage of each days sales (in this example, 10 percent), until a total of $11,000 is repaid. This includes an extra $1,000 for the service.
But Square points out this is not a loan. So the fee due back for the service will not change, no matter how long it takes to repay the total amount.
Though few other specifics are available from the company website, the percentage of daily sales is probably tied to the amount of the advance. It could also have to do with the volume of payments a merchant is currently processing with Square.
Back in May, Square merchant Extreme John shared some specifics of the company’s Capital pilot program showing three basic tiers of advances and payments:
- $3,200 with repayment of $384 at 4 percent.
- $5,600 with repayment of $672 at 7 percent.
- $8,100 with repayment of $972 at 10 percent.
Given the example on the Square website, there are probably some other options too.
Square is not the only payment processor to offer such merchant advances.
For example, PayPal merchants can get up to $8,000 with repayments at 10, 12, 15, 20 or 30 percent. The higher the percentage, the lower the one time cost added to the advance. And you must be averaging $100,000 in annual sales to qualify.
American Express also offers an annual or monthly advance to some of its merchants. The company’s website says amounts available and fixed repayment fees are based on a company’s credit and debit processing history.