Square becomes latest fintech to offer super-fast loan financing for Aussie SMEs

Payments fintech Square has become the latest player to announce it is rolling out a loan financing offering to its small business customers.

Square Loans will be the first financial services product 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 loans service is expected to launch here within this quarter, marking the first time it has been available outside of the US.

The product is intended to offer Square’s small business customers access to funding quickly and in a way that’s simple and fair, Samina Hussain-Letch, head of industry and payments at Square Australia, tells SmartCompany.

The business uses the data it already has on a business to determine the maximum amount available to them.

That figure will then be automatically pushed out to them via their Square dashboard, allowing business owners to choose whether to apply for the full amount, for a smaller amount, or not at all — with the loans ranging from as little as $300 up to $250,000.

There’s no interest rate, but an upfront fixed fee based on the size of the loan and the risk profile of the seller.

Repayments are then taken as a percentage of the business’ daily sales made through the Square payments platform.

“If they have a quiet week, which we know happens … they’ll pay back less, and if they have a busy week they pay back more,” Hussain-Letch explains.

Typically, Square expects full repayment within 18 months. However there are no additional fees or penalties if that time frame is not met.

In the US, the average time to pay back a loan is about eight months, Hussain-Letch says. But, if a seller is struggling, the team will work with them to change the repayment structure and extend the timeframe.

Following the crowd?

The timing of this launch is “really intentional”, Hussain-Letch notes.

As we’re moving out of the COVID-19 health crisis, businesses are reopening, but are facing cash flow shortages.

Originally, the team was planning on launching last year, but instead pivoted to focus on tools to help them operate smoothly during the pandemic, supporting contactless pickup and QR code ordering and payments, for example.

Now, the time is right to help give them the momentum to emerge from the economic dip, Hussain-Letch says.

And Square isn’t the only one jumping on this opportunity.

Just in the past couple of weeks Zip Business has launched a new buy-now, pay-later style product offering small businesses up to $150,000 in credit. And, MYOB has announced a strategic partnership with fintech Butn to offer invoice financing for SMEs.

This is all activity Hussain-Letch has been keeping an eye on. And she, for one, welcomes the competition.

“There’s lots of movement in this space and we expect to see lots more,” she notes.

Small to medium-sized businesses have historically been underserved, she says. Square’s own research suggests sellers aged under 40, and women in particular, find it especially difficult to access capital.

The more offerings there are that serve different needs the better.

“If sellers have options, that’s really great for them.”

There is, of course, a lingering question as to whether more debt is what small businesses need after a particularly tricky 12 months.

Again, Hussain-Letch points to research, saying this is something she and her team know Square customers want.

The data they have access to also means they have an insight into the performance of each business, and can accurately assess whether they’re in a good position to take on a loan.

Being a responsible lender is important to her, she says.

“We’re not in the business of offering loans, we’re in the business of helping sellers grow the business,” Hussain-Letch stresses.

“Doing that in a responsible way is absolutely central to how we’ve designed this product.”