Square Capital is a working capital loan for small businesses with repayment terms based on a percentage of your daily credit card sales processed through Square. This financing option is used by businesses who process a majority of their sales through the Square system, and need quick working capital financing. Square Capital alternatives for working capital include a business line of credit, short term loans, and invoice financing.
Square Capital vs. Working Capital Alternatives
| Loan Provider | Who It’s Best For |
|---|---|
| Square Capital | Businesses processing credit card payments with Square, that need financing up to $100K. Learn more. |
| Fundbox | Businesses that want lines of credit up to $100K without a personal credit check. Learn more. |
| Kabbage | Businesses that need a line of credit up to $250k without mandatory withdrawals. Learn more. |
| OnDeck | Businesses that need term loans up to $500K with amortized payments. Learn more. |
| BlueVine | Businesses with consistent cash flow needs who want a quick line of credit up to $250K. Learn more. |
How Square Capital Works
Square’s working capital loan is similar to a merchant cash advance (MCA) but specifically for businesses that process credit cards through Square POS. Your sales play a major role in both forms of financing as they both base their loan amounts on historical sales performance. Both have an easy application process and get your funds in as little as one (1) business day.
With Square Capital, your loan amount and approval is based on your historical Square sales. You can typically borrow up to $100k and you’ll be charged 1.1x – 1.16x (cost of capital) the amount you borrow. So, if you borrow $100k, you’ll get a lump sum of $100k deposited into your account, and then you’ll have to repay a total amount of $110k. The entire loan will be repaid daily, taken directly from your Square sales. These rates are competitive with most merchant cash advance providers.
With Square’s working capital loan, your repayment terms will vary based on the credit card sales you process through Square each day. You can borrow up to $100K with an APR between 30-35%. You’ll make daily payments between 8-15% of your daily credit card receipts processed through Square. Your APR is variable because repayments are based on a percentage of your daily credit card receipts.
Is Square Capital right for you? Take our quiz. This 2-minute quiz will show you which financing options may be best for you.
Who Square Capital is Right For
Square Capital is right for small businesses that use Square to process the majority of their sales and who need a short term working capital solution up to $100K. You might choose Square over an alternative financing option if you don’t want a hard credit check on your personal credit, want repayment terms based on your daily credit card sales, or if you just need a fast business loan.
Square Capital Rates
Square Capital charges a one time fee equal to 1.1x – 1.16x of the amount you borrow. This means you can expect to pay just ten to sixteen cents ($0.10 – $0.16) for every dollar you borrow. For example, if you borrow $100K from Square, you can expect to repay fees of about $10,000 – $16,000, or a total repayment of $110,000 – $116,000.
Square Capital Terms
Businesses that use Square POS can borrow between $500 – $100K and use the loan for any working capital need. Your loan – including fees – must be paid back in full within 18 months. Payments will be taken daily as a percentage (8-15%) of your total Square sales and are automatically deducted for you during processing. Every 60 days you must pay a minimum of 1/18 of your total loan balance.
Using our $100K example above, each day a percentage of 8-15% is automatically deducted from your daily Square sales until the entire $110,000 is paid in full. You’re required to pay a minimum of 1/18 of your loan balance every 60 days, or $6,111.11 on a $100K loan. At the end of 18 months if you haven’t paid off your loan, the remaining balance is due.
Square Capital Qualifications
Square typically requires a minimum sales processing volume of $10K+ per month, but the more you process the better chance you have at getting approved and the more you’ll be approved for. That is the only set in stone requirement to qualify. They don’t even require a credit check for approval. Other factors do impact your ability to get a loan, which includes:
- Square History: Square will look for sales trends and how your business might grow in the future.
- Square Activity Level: The number and frequency of your payments matters. If you’re an active Square seller that gets payments every week, then you’ll be in a good position to qualify.
- Customer Mix: Are you getting customers to come back for multiple purchases? If you’re diverse in both new and returning customers gives Square a comfort level that you’re growing in both directions.
- Overall Growth: If you’re growing at a healthy rate, then your approved loan size will typically reflect that. The more you’re growing, and the faster you’re growing, the larger your approved loan amount will be.
If you meet each of these expectations, then your chances are getting approved for a Square loan for the amount you need is high. The best candidates are often offered a Square Capital loan through their Square dashboard before they even apply.
So if you see this offer, you’re automatically approved and you can decide to use it whenever you want, kind of like a line of credit except that once you accept it you get a lump sum payment. Square Capital reserves the right to take away this offer at any time, so if you’re interested you should move quickly.
This working capital solution is very similar to PayPal Working Capital, which is for businesses that use PayPal to process their customer payments. Square merchant services is typically a better solution for brick and mortar businesses since PayPal processes mostly online transactions. The way they work is almost identical in regards to both getting funded and repaying the loan, including having a quarterly minimum payment amount you must make.
Square Capital vs. Kabbage
Kabbage is an online business lender that offers small business financing similar to a line of credit. Businesses receive a maximum credit line that they can draw on as needed, and you only have to pay interest on the portion you use. Payments are made in equal monthly installments during the repayment window of 6 or 12 months.
Square is different than Kabbage because with Square you receive your entire loan balance up front, and they don’t consider your personal credit during the application process. Kabbage is easier to qualify for than other small business loans, but they still require a 550+ credit score. Kabbage lets you draw on your credit as many times as you need. Each draw is considered its own loan and has repayment terms of 6 – 12 months.
For example, let’s say you have a $100K Kabbage credit line and draw $10K initially. This $10K is repaid monthly with payments of principal plus a flat monthly fee over either 6 or 12 months. If you draw an additional $10K the next month, this $10k becomes its own loan with its own repayment terms.
Kabbage offers a good alternative business financing option for:
- Businesses who don’t know how much they need to borrow
- Business owners who need access to capital but don’t need to borrow money yet
- Businesses with an unpredictable cash flow
- Businesses who want to borrow money with fixed monthly payments
- Businesses who have poor credit
Kabbage Rates, Terms, & Qualifications
Kabbage’s online business loan is a revolving line of credit like a credit card. There is no requirement to use the credit line and you only have to repay what you borrow. Each draw is considered its own loan and is charged a flat monthly fee between 4% – 10%. The maximum credit line is $250K, and the minimum draw is $2K.
Typical Kabbage rates and terms are as follows:
- Line of Credit Amount: $2k – $250k
- Repayment Terms: 6 – 12 Months with no repayment penalties
- Monthly Fee: 4% – 10% of amount borrowed
- Expected APR: 30 – 50% (average of ~40%)
- Funding time: 1 – 3 days
To qualify for a Kabbage line of credit you’ll need a 550+ credit score (check your credit score for free), 1+ year in business, and $50K+ in gross annual revenue. Kabbage offers lines of credit up to $250K with repayment terms between 6 – 12 months. You can get approved online within a few minutes and funded in as quick as 1 day.
Square Capital vs. OnDeck Capital
OnDeck Capital offers short term business loans of up to $500k. They charge an origination fee as well as interest and are amortized with fixed monthly payments. Their online application takes less than 10 minutes, and you can be approved and funded within 1 day. They’re typically a good alternative to Square if you need larger loan amounts above $100k.
This differs from Square because OnDeck’s term loans are similar to standard small business loans with fixed amortized payments while Square is closer to an MCA.
OnDeck is a good alternative financing option for:
- Business owners who don’t have strong personal credit
- Businesses that want a fixed repayment schedule
- Businesses that need loan amounts greater than $100K
OnDeck Capital Rates, Terms, & Qualifications
OnDeck Capital’s term loan has a maximum loan amount equal to $500K and terms up to 36 months. An OnDeck loan will be less affordable than Square Capital, but if you have poor credit and need more than $100k then it might be your best option.
The OnDeck Capital term loan rates, terms, and qualifications are as follows:
- Loan amount: $5k – $500k
- Loan term: 3 – 36 months
- Expected APR: 30% – 50%
- Funding time: 1 – 3 days
- Origination fee: 2.5%
OnDeck requires annual gross revenue of $100K+ and 12+ months of business operations. Unlike Square, OnDeck also uses a business owner’s personal credit score as part of the application process, requiring you to have a 500+ credit score (check your credit score for free). This requirement is comparatively low to other loan types. You can learn more by reading about our best short term business loans.
OnDeck offers term loans up to $500K with repayment terms between 3 – 36 months. Repayments are fixed and fully amortized. Rates start as low as 6.99% for prime borrowers, but the expected APR range is 30% – 50%. You can apply online within a few minutes and get funded in as quick as 1 day.
Square Capital vs. Fundbox
Fundbox offers a small business line of credit based on the value of your outstanding invoices. The value of their line of credit is backed by asset collateral and there’s no minimum credit score requirement. Their online application takes minutes, typically funding you in 1-2 business days.
Square Capital offers a loan that is secured by credit card receipts and other business assets if the loan goes unpaid. Fundbox, on the other hand, is essentially an unsecured business loan, because they don’t use any business assets to secure their loan. If they fund you for an unpaid customer invoice and that customer doesn’t pay, there is no repercussion other than how it might impact your future funding.
Both Square and Fundbox offer great working capital financing options up to $100K. Fundbox requires weekly payments compared to Square’s daily payments, and you must fully pay back your Fundbox financing within 12 to 24 weeks. Both options are a good choice if you don’t want to impact your personal credit score by having it checked.
Square bases your loan amount on historical sales while Fundbox offers their line of credit amounts based on the value of your invoices. The amount you repay with Square varies based on your sales and how long it takes you to repay the loan, while the amount you pay Fundbox is fixed regardless of how fast you repay it.
Fundbox is a good alternative to Square Capital for the following:
- Business owners who want a loan with a short repayment term
- Businesses that have between $1k – $100k of outstanding customer invoices
- Businesses that need funding in as quick as 1 day
Fundbox Rates, Terms, & Qualifications
Fundbox charges a weekly fee known as the discount rate. In addition to repaying a portion of the principal weekly, you’ll also have to pay this fee, typically between 0.5% – 0.7% of the advanced invoice amount. You get to choose either 12 or 24 weeks for your repayment terms.
Fundbox’s typical rates, terms, & qualifications include:
- Loan Amount: $1k – $100k (up to 100% of invoice values)
- Repayment Term: 12 or 24 weeks
- Discount Rate: 0.5% – 0.7% per week
- APR: 38 – 54%
- Funding Time: As quick as 1 day
Their business loan requires no personal credit check as part of the application process. This is because the loan is backed by the value of a company’s accounts receivables. However, Fundbox requires that a business must have at least:
- 6+ Months of operations
- Have outstanding B2B, B2G, and/or B2C customer invoices
- All invoices have to be due in 90 days or less to qualify.
You can read our guide on the best accounts receivable financing companies for more information. Fundbox also offers a more traditional line of credit product with similar qualifications that isn’t based on outstanding invoices. Instead, Fundbox will connect to your accounting software and evaluate your qualifications based on your recent financial history.
Fundbox can you get you financed for up to $100K based off of your outstanding customer invoices. The cost is 0.5% – 0.7% weekly, and you have the choice of repayment terms between 12 to 24 weeks. The application process can be completed within minutes and you can get funded in as quick as 1 day.
Square Capital vs. BlueVine
BlueVine as a small business lender that offers lines of credit up to $100k. They allow you to borrow what you need while only paying interest on the part of the line you use. You can apply online within minutes and be fully funded in as quick as 1 day. It’s similar Fundbox’s line of credit but BlueVine requires a 550+ credit score and offers a more affordable APR for prime borrowers.
Bluevine differs greatly from Square in relation to their repayment terms. While Square requires daily repayments based on credit card sales, BlueVine’s line of credit product has a set weekly payment for 12 weeks.
BlueVine is a good alternative to Square working capital for the following:
- Businesses with outstanding invoices due in less than 90 days
- Businesses that need more than $100K (up to $2.5 million) in financing
- Business owners who need access to capital but are unsure of how much they need
- Businesses that have trouble collecting invoices from customers
- Businesses needing a working capital solution to speed up their cash flow
BlueVine Rates, Terms, & Qualifications
BlueVine works just like any business line of credit you’ve seen before. When you make a payment that amount is added back to your available credit for you to draw against as you need. Their fees are straightforward, starting at 4.8% and have no prepayment penalties.
BlueVine’s typical line of credit rates, terms, & qualifications include:
- Line of Credit Amount: $1k – $250k
- Repayment Terms: 6 – 12 months (no prepayment penalties)
- Monthly Fees: Starting at 4.8% of amount borrowed
- Expected APR: 30 – 60%
- Funding time: 1 – 3 days
- Credit Score: 600+
- Time in Business: 6+ Months
- Minimum Monthly Revenue: $10k+
There is no minimum credit score requirement for this AR factoring option. However, BlueVine requires that you have at least $30k in outstanding invoices due in 90 days or less and have at least 3 months of business operations.
BlueVine is a great option for small businesses with invoice values of at least $30k. The lender will factor up to $2.5 million with an advance rate up to 90% and discount rates between 2.5% – 5%. The application process takes minutes and you can get funded in as quick as 1 day.
Bottom Line
Square Capital offers a working capital loan based on the value of your daily credit card sales that are processed through Square. This is a great option for businesses that use Square as the primary way of collecting customer payments. However, there are other working capital alternatives that work for businesses.
Kabbage offers lines of credit up to $250K with repayment terms between 6 – 12 months. Monthly fees start at just 4%, and there’s no prepayment penalty or service fee for unused funds. You can fill out an online application within 10 minutes and get fully approved and funded in as quick as 1 day.
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