Small Biz Cash Advances Made Easy

Square Reader.jpeg (1)As we’ve noted before, the lending world is changing. A topic that gets considerable attention in the media is the reluctance of traditional lenders to make small business loans, so it really caught my attention when I heard about a new program from Square.

Square makes the über-cool Square Reader that lets you use your smartphone or tablet to accept credit cards. If ever there was a “disruptive” technology, this is it. (I’m waiting for some innovative charity to start issuing them to the homeless, so folks can have a better idea how their money is being spent and donate with greater confidence.)

Growth funds

Twitter co-founder Jack Dorsey is the driving force behind Square and now he wants to empower the small businesses that use the device and help them fuel future growth. Although Dorsey isn’t calling this new Square program a lending service, the result is the same for businesses.

Here’s the deal. A merchant is fronted a lump sum of cash from Square at a certain cost. For example, Square might advance you $10,000 and you agree to pay back $11,000. Then, each time you make a transaction using the Square Reader, a percentage of the transaction goes to the $11,000 you agreed to pay back.

Each time you run someone’s credit card, you would be paying down the debt. I like the idea because it allows small businesses to be good “borrowers” through the busy season and the slower times throughout the year. The way the deal works, the debt doesn’t have to be repaid within any specific time frame.

Paperwork reduction

It also relieves the small business owner from having to deal with yet another monthly bill. Anything that reduces the paperwork avalanche business owners face all the time is a major benefit in my book.

It also reduces—or almost eliminates—the amount of paperwork a small business owner needs to do to get a loan, or “cash advance.” Because Square knows how much volume your business does, it knows exactly how much cash the company is willing to advance your business.

Back in the day, local bankers had this kind of feel for merchants in the community, and were able to tailor loans accordingly. With the Square cash advance program, technology is taking the place of that “personal touch”—and doing so quite ably, it seems.

Painless payback

Darren Scott, who runs the art clothing store Zero Friends, has used the program twice. “It was much easier to get than a traditional loan. Everything was straightforward and easy to understand. Also it was hassle free when it came to paying back the advance…every day a small percentage of our credit card sales were taken out of our account to pay back the advance. We barely noticed it was even happening,” Scott told TechCrunch.

If you take credit cards, and haven’t yet explored ways Square could benefit your business, you need to check out the technology. And if you’re using the device, see if you could benefit from an advance. It looks like a pretty square deal to me. (Sorry.)

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