Just clarify, square is the largest
online small business lender in the US Of those,
for those which we have data on, let's keep in mind
that there are plenty of large small business lenders out
there who might not be considered an online lender,
but we might not have data on them.
Square AKA block is a publicly traded company.
Therefore we have access to their origination volume
through square loans of those that we have data on.
And we consider part
of its category square ranks number one.
Now, I wasn't surprised to Sue Square at the top. Mm-Hmm.
And I'll tell you why. Why Square is different from a lot
of their peers in the industry.
Because what they did is they combined the best attributes
of their peers and competitors
and lumped it all into one single business model.
Yeah. I had to write them down. Yes.
Because it's, it's truly kind
of revolutionary when you think about it.
And I actually talked about this particular topic
at G Event Connect Miami.
Mm-Hmm. My opening session in Miami was,
how come these online business lenders are number one?
Yeah. What is the, what is the reason for that?
And I think it's important to kind of break down, are these,
are these things that others can replicate
or are they truly in some sort
of a magical land of their own?
And let's break down exactly why Square Yeah.
Is what they are. Okay.
First of all, square, they use split payments
like an MCA product.
Mm-Hmm. So when you get a loan from Square, you pay back
by giving them a percentage of each card sale that you do.
That mechanism is very merchant cash advance,
like it's called a split.
So they use that to get paid back.
But here's where it gets a little different
and why they depart from everybody else
who uses that mechanism.
Their product is absolutely repayable. Mm-Hmm.
Because it's a loan. Mm-Hmm.
And MCA is not absolutely repayable. Mm-Hmm.
The square loan is, so they're taking a percentage
of credit card sales, but if, uh, if they don't get them,
uh, back, if there's no future generated
receivables, you still owe the money.
Yeah. It's absolutely repayable.
Uh, number three, they're the max term. Okay.
On this product for an MCA, you take a percentage
of credit card sales up
until you get back to purchase amount.
That's not, that's not true.
But Square, they put a maximum term on the loan.
So they might say it's 12 months or 18 months.
And if you don't pay back by that date,
the whole thing is due anyway.
Yeah. There's no infinite time. Yeah. Yeah.
Um, number four,
there's no reliance on a third party bank partnership.
There's a lot of quote unquote lenders out there.
They're not really the lenders themselves.
What they're doing is they partnered up
with the bank. The bank
Makes the loan, and then they buy the loan from the bank.
The bank partnership model. Yeah.
And there are legal risks that come with that.
It's been under attack somewhat by state
and federal regulators or people who complain
and they don't think it should work that way.
But what's different is that Square is a bank.
They are the bank. So it's not a bank
partnership, they're the bank.
Uh, the next one is that banks, now that they're a bank,
banks are exempt from a lot
of the disclosure laws that are coming out.
Yeah. In fact, a lot of the, the new commercial finance laws
that are coming out, banks are typically
exempt from the beginning.
'cause banks are already held
to a very high standard from a reg regulatory perspective.
They're also the credit card processor.
When you do an MCA, typically you have
to rely on a third party.
The credit card processor takes a percentage
of each sale on your behalf.
Yeah. And then forwards it to you. Yeah.
So you have, you're dependent on that partnership. Yeah.
Square is the credit card processor or block is right.
It's the same, but it's the same company.
So that's a huge advantage. And then lastly,
the borrowers are their own payments customers.
One of the hardest things about the industry is the money
spent acquiring new customers.
That's why people spend money on leads.
That's why everyone's concerned about
how much they pay for marketing.
It's because that's one of the,
the biggest cost period in the entire industry.
Imagine if you didn't have any marketing cost,
any lead acquisition cost
or customer acquisition cost at all,
because this product is purely marketed to this massive
existing customer base that you had.
So when you asked Johnny, am I surprised
that Square was number one?
Absolutely.