Square Capital Revs Up, Funds $189M to Small Biz in Q2

Square is proving that the business loan sector is still hot, especially since their payment processing ecosystem requires nearly no marketing budget to advertise Square Capital. With $189 million funded in Q2, a growth of 123% year-over-year, their shift from merchant cash advances to loans seems to have had the desired effect since they have attracted even more investors willing to buy them.

“We sell a majority of our loans to third-party investors for an upfront fee and a small ongoing servicing fee. In addition, we continue to have a strong continued pipeline of interested investors,” the company said in its earnings report.

The average loan size remains small, only $6,000, but ranges from $1,000 to $100,000. Square CFO Sarah Friar, said during the earnings call that their data shows an overall increase in the gross payment volume of merchants who use their loans, which indicates that borrowers are indeed using the funds to grow their businesses.

A typical Square Capital loan is close to 10% of a seller’s annual processing sales and the average repayment term is 9 months. Loss rates remained steady at 4%.

Friar also said that PayPal Working Capital and American Express Working Capital were not really competition since they are working directly with their own existing user base.

The company made about 34,000 loans in Q2.

Sean Murray is the President and Chief Editor of deBanked and the founder of the Broker Fair Conference. Connect with me on LinkedIn or follow me on twitter. You can view all future deBanked events here.