Square Swaps Out Merchant Cash Advances for Business Loans
March 25, 2016
Square’s merchant cash advance program is already among the biggest in the world, but they’ve got even bigger plans, or maybe just different ones.
The company announced on Thursday that they will now be offering true business loans as well through a partnership with Celtic Bank, an industrial bank chartered by the State of Utah. The WSJ reports that loan payments will also be made via a split of future credit card sale activity but with the caveat of there ultimately being a fixed term. This is coincidentally how PayPal’s loan product works.
The WSJ makes it seem as if both products will run alongside each other, but a Square merchant revealed to AltFinanceDaily that all of the language on Square Capital’s application portal has changed from advances to loans. Even the promotional materials have changed to reflect that it may take more than just an automated review of historical credit card sales activity to get approved and funded. Also, all Square loans are subject to credit approval, whereas no credit check was required for merchant cash advances. Applicants may be required to produce a photo ID and other documents for further verification. North Dakota businesses are prohibited from borrowing altogether.
Square’s loans require that merchants process at least $10,000 or more a year. Borrowers must pay at least 1/18th of their initial loan balance every 60 days. PayPal by comparison requires that their borrowers pay down 10% of their loan amount every 90 days.
A Square merchant was not able to locate any mention of the merchant cash advance program. It’s all loans now.
Did Square really just add business loans to their arsenal or have they traded MCAs for the bank charter lending model?
Update: 3/25 2:54 PM Square confirmed that they have indeed replaced their merchant cash advance program with the loan program.
Our Square Capital program is transitioning from merchant cash advances to flexible loans. https://t.co/oUyRtNgVSS pic.twitter.com/ELXC7ayJyU
— Square (@Square) March 25, 2016
Square Buys Analytics Startup for Its Merchant Cash Advance Team
March 14, 2016Square has acquired analytics startup Framed Data to better target customers for Square Capital.
The startup mined data using machine learning to predict user behavior and purchasing decisions. Founded by data scientists in 2013, Framed Data will help Square use analytics to provide more capital to more merchants.
Square Capital is a big business for the company. It funded over $400 million in 70,000 merchant cash advances last year. The company’s first earnings report last week showed that it is beginning to bring bigger merchants into its customer base. The majority of Square’s point of sale customers are micromerchants, a fragmented market of low volume businesses.
It’s a crucial time for the company to prove to investors that it can grow beyond point of sale solutions for payments and Square Capital will play a major role in that.
If Wall Street Likes Square, Why Is the Stock Falling?
March 10, 2016
Jack Dorsey-led payments company Square released its first earnings as a public company yesterday and although it did not disappoint, it just wasn’t enough to keep its stock from tumbling.
Square’s stock opened 7.86 percent lower today even after its fourth-quarter revenues totaling $374 million beat analysts expectations hovering around $345 million. The San Francisco-based company proved to skeptics that its business is more than just payments with a convincing quarter. The seven year old company that went public in November 2015, originated more than $400 million in merchant cash advances annually and over $150 million in the fourth quarter with an average deal size of $6,000 and its software and data business brought $58 million in annual revenue.
Square also processed $10.2 billion in payments from 2 million merchants in the fourth-quarter, at an annual increase of 47 percent. Square realized that the best way to retain consumers is to sell them more products without losing its core — payments. The company received 350,000 orders for the mobile point of sale chip reader which accepts payments on smartphones. “We want to associate our logo with the ability to pay with your phone,” said Jack Dorsey during the earnings call.
Square is confident that it has built a “cohesive commerce ecosystem” for merchants. Then why is the stock being punished?
Square’s Merchant Cash Advance Program Now Among Biggest in the World
March 10, 2016Square originated more than $400 million worth of merchant cash advances advances in 2015, according to their Q4 earnings report. Their average deal size was just shy of $6,000. The result is a 300% increase year-over-year and makes them one of the largest players in that industry worldwide.
RANKINGS
| Company Name | 2015 Funding Volume | 2014 Funding Volume |
| OnDeck | $1,900,000,000 | $1,200,000,000 |
| CAN Capital | $1,500,000,000 | $1,000,000,000 |
| Funding Circle | $1,200,000,000 | $600,000,000 |
| PayPal Working Capital | $900,000,000 | $250,000,000 |
| Bizfi | $480,000,000 | $277,000,000 |
| Fundry (Yellowstone Capital) | $422,000,000 | $290,000,000 |
| Square Capital | $400,000,000 | $100,000,000 |
| Strategic Funding Source | $375,000,000 | $280,000,000 |
A much longer list will be available in AltFinanceDaily’s March/April 2016 Magazine Issue. SUBSCRIBE FREE to make sure you obtain a copy.
Square Goes Back To The Drawing Board, Ahead of First Earnings
February 19, 2016
Square is bracing for its first milestone as a public company – its first earnings report.
On March 9th, the payments company will present a scorecard of how it’s doing and what that means for its investors. Visa picking up a 10 percent stake in the company came as a respite for the stock which has generated close to 27 percent losses since its IPO.
But that might not be enough to prove that the seven year old company is in a sustainable business. Square has to prove that it is all a small business needs. From capital, payroll to point-of-sale, Square wants to be the one stop shop for small merchants, not relying entirely on its payments business which makes up 95 percent of its revenue.
When the company started in 2009, its strategy was to go after micro merchants that were too fragmented and small for bigger payments companies. Square started by giving these merchants a dongle to accept card payments for a flat fee. While the idea was to serve an untapped market, the company could not be shielded from the risks that these merchants bring to a business with their heterogeneity, fragmentation and smaller deals.
But ahead of its first earnings call, the company is ramping up its efforts towards bringing more businesses into its fold. Forbes reported that Square expanded its payroll product to merchants in Tennessee, New Hampshire, Nevada, South Dakota, and Alaska in addition to the existing markets of California, Texas and Florida allowing them to serve 30 percent of independent businesses in the U.S.
Transaction Successful: Visa Buys 10% Stake in Square
February 12, 2016
Visa just bought a 10 percent stake Jack Dorsey’s payment company, Square.
The payments network revealed an SEC filing announcing its 9.99 percent stake in the company and Square’s stock jumped 11 percent at market opening. Visa seemingly upped its stake, from the previously undisclosed investment it made in the company in 2011, according to CNNMoney. The deal makes Visa the fourth-largest investor in Square following Jack Dorsey himself, venture capital firm Khosla Ventures and major mutual fund, Capital Research and Management.
Square was started in 2009 as a point of sale solution for merchants. It turned heads with $10 million in Series A funding from Khosla Ventures and Marissa Meyer at a $40 million valuation. Since then the company has diversified into p2p payments with Square Cash and Square Capital, offering merchant cash advances to small business merchants.
The company went public in November 2015 and debuted on NYSE with a 30 percent discount, pricing its share at $9.
As it tries to gain a foothold in the competitive payments space, this fresh infusion of capital comes as good news for the stock which has generated close to 27 percent losses since its IPO.
deBank the World: See the Times Square Ad Campaign LIVE
January 1, 2016If you didn’t make it to Times Square for the New Year’s Eve celebration, you’re probably a lot better off. But if you’re not going to be in that neighborhood any time soon either, you can still catch a LIVE glimpse of three very important company logos that are broadcasting on a video billboard above 43rd and Broadway. (hint: look at the top left)
The AltFinanceDaily ad in particular, which only makes a handful of appearances every hour in the rotation, can be viewed in the continuous live stream hosted by Nasdaq. (Update: The ad was retired in early 2016)
What isn’t visible is the half of the screen that wraps around the building. On that side is the story produced by BizBloom, the company behind the campaign. In the video above, you will occasionally see the logos for AltFinanceDaily, BizBloom, and Quick Bridge Funding in the top left hand corner. The live stream has the ability to rewind up to the previous 3 hours. So if you don’t want to wait, rewind to different parts until you spot them.
Below is the video footage you can’t see that wraps around the other side of the building:
The purpose of the campaign, according to BizBloom’s Thomas Costa, is to tell the story of the American Dream, particularly the struggles and accomplishments of entrepreneurs.
Happy New Year.
BizBloom Lights Up Times Square
December 24, 2015BizBloom’s “Yes, we’re local” campaign produced by industry veteran Thomas Costa is making its debut in New York City’s Times Square. Its mission, according to Costa, is to tell the story of the American Dream, particularly the struggles and accomplishments of entrepreneurs.
To do that, BizBloom intends to rely on the help of college students to interview small business owners all over the country. The stories that garner the largest social media responses will be featured in their slot airing over 43rd and Broadway. Additionally, for each story a student collects, BizBloom will donate to a special scholarship fund.
The campaign is already live and includes supporting endorsements from Quick Bridge Funding and AltFinanceDaily:
