A Square IPO Would Be Alternative Lending’s Third

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Square IPOFirst Lending Club, then OnDeck, and now… Square? The news media was flooded with stories late last week that payments company Square had filed their S-1 in secret. The move can be done under a JOBS Act provision that allows companies that grossed less than $1 Billion in revenue in the most recent fiscal year.

Square’s merchant cash advance arm, Square Capital, reportedly funded $100 million to small businesses in 2014, a figure large enough to earn them a spot on the deBanked leaderboard.

While often reported as a lending program, Square’s own website describes their working capital transactions as sales of future credit card receivables. At face value, and aside from what their contracts might actually say, it’s a textbook merchant cash advance.

While some publicly traded companies have dabbled in merchant cash advances, the financial product is one of Square’s two major products, the first obviously being payments.

And while OnDeck offers loans that are very similar to merchant cash advances, Square could potentially be the first true merchant cash advance IPO.

View a list of Square’s shareholders and their percentage of ownership

Also on the IPO watch list is CAN Capital, a company that offers both loans and merchant cash advances. In November of last year, Bloomberg and WSJ claimed the company was already working on it. While it has been eight months since that news came out, word on the street is that a CAN Capital IPO is still very much a possibility.

Unfortunately, because of the same JOBS Act provision that allowed Square to file an S-1 (if they actually did) also applies to CAN Capital. There is no way to know what’s going on behind the scenes until the filing is made public or leaked to the media.

Either way, the end of 2015 will likely end in at least one more IPO for the commercial side of alternative lending.

Could Jack Dorsey and his wacky beard be the future face of the merchant cash advance industry?

Last modified: July 27, 2015
Sean Murray

Category: Business Lending, merchant cash advance

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