Square Capital Overview

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Square Capital (squareup.com/capital) is a merchant cash advance service offered by mobile POS provider Square. Launched in May 2014, Square Capital is intended to be a simpler alternative to third-party merchant cash advance programs, which can require business owners to undergo a rigorous screening process before receiving their funding. With Square Capital, merchants are preapproved based on their processing history, which enables them to sign up for financing in just a few steps within the Square dashboard. They then repay the total amount borrowed by giving Square a fixed percentage of their daily credit card sales.

Square Capital is repaid as a fixed percentage of credit card sales. There is no repayment schedule, and the amount owed does not change for the merchant. For instance, if a merchant receives $10,000 from Square Capital, that merchant might then owe Square $11,000, which will be repaid with 10% of the merchant’s daily credit card sales (actual figures will vary depending on a merchant’s business type and processing volume). The merchant will pay this 10% amount until the amount is fully repaid, regardless of how long it takes.

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Square Capital Rates, Fees, and Costs

Key Points

Swiped Rate Variable
Keyed-in Rate Variable
Early Termination Fee None
Monthly Minimum None

Square Capital’s pricing and terms are similar to other cash advances or loans with the exception that they are repaid over an undefined period of time in the form of higher per-transaction fees charged by Square. The total costs of Square Capital cash advances are outlined up front, as are the elevated fees that the merchant will pay until their cash advance is repaid. This makes a Square Capital cash advance a predictable, flexible source of funding.

The primary advantage that Square Capital offers over its competitors is its simplicity. Once a merchant qualifies for the program, a notification will appear in the Square dashboard explaining the program and all available financing options. From there, the merchant just has to select a proposed funding amount and agree to the terms. The funds will then be delivered to the merchant’s bank account within a day or two and repayment will begin seamlessly as the merchant continues to process payments.

The fact that Square does not make the program eligible to new merchants is another key factor in its favor. Square bases program eligibility on each merchant’s processing history, meaning that the company has a large amount of sales information to draw upon when crafting a cash advance proposal. Square advertises that it drafts its cash advance proposal with the expectation that the merchant will repay the advance in full within about ten months. Provided that the company takes this claim seriously, it appears that merchants are unlikely to find themselves saddled with a crushing financial burden through the program.

Aside from Square’s unique signup process, the program offers the same advantages as all other merchant cash advances. Its eligibility requirements are far less stringent than traditional small business loans, and the cash advance amount cannot be collected in the event that the merchant’s business fails. This is because a merchant cash advance is a sale of future card proceeds rather than a loan. Therefore, if a merchant’s card proceeds are zero, then Square cannot collect any earnings.

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Square Capital Complaints & Customer Reviews

Key Points

Total Online Complaints 10+
Live Customer Support Active Merchants Only
Most Common Complaint Merchant Eligibility Revoked

Despite the astronomical number of online complaints that have been filed against Square’s credit card processing service, there are very few Square Capital negative reviews to be found in public forums. In fact, the main complaint voiced by Square Capital users is that they were denied additional opportunities to obtain Square Capital advances for various reasons. This indicates that most users are happy with the service and only dissatisfied when a separate issue with Square prevents them from using it.

Square Capital appears to dodge many of the issues that plague third-party cash advance providers because it limits eligibility to merchants who are very likely to repay their advances. This allows Square to collect a modest amount of “interest” while still keeping the repayment plan manageable for merchants. However, one major drawback to Square Capital is the fact that it comes as part of Square’s credit card processing service.

Square is best suited for individuals who need to accept occasional credit card payments, like flea market vendors or babysitters. High-volume businesses or heavily trafficked retail locations, however, run the risk of having their accounts frozen and funds held by Square with little advance warning. In addition, Square’s customer service is conducted entirely through email and through an FAQ section on its website. In other words, there is no way to contact Square by phone in the event of a problem, which can be a very frustrating situation for a growing business that needs a reliable revenue stream.

Square Capital is only available to merchants with established processing histories, so it is likely that the service is targeted at businesses that are projected to grow steadily over the course of the repayment period. Therefore, it’s possible that a merchant could outgrow Square’s processing solution but still have to remain with Square because of the binding Square Capital agreement. Put another way, this means that Square Capital may partially function as a merchant retention tool that allows Square to keep merchants who might otherwise require a more robust processing solution.

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Square Capital BBB Rating Summary

Key Points - BBB

Product & Service Complaints 549
Billing & Collection Complaints 277
Advertising & Sales Complaints 461
Guarantee & Warranty Complaints 34
Delivery Complaints 63

Note: We have adjusted this company’s BBB rating according to our own standards. To better understand why we adjust BBB ratings, please see our Rating Criteria.

As of this update, the Better Business Bureau is reporting an “A+” rating for Square despite 1,384 complaints filed in the last 36 months. This complaint total is up from the company’s total at the time of our last update (1,185), which may indicate that Square’s BBB complaint total could increase further. The number is up from 812 complaints as of our January 2014 update and 603 complaints as of our July 2013 update, and has skyrocketed from just a few dozen complaints since we first published this review in April of 2011. Surprisingly, the BBB has also raised Square’s grade from a “B+” in July of 2013 to an “A+” despite the rising complaint volume.

Of the complaint total, 549 are regarding problems with service, 277 with billing and collection disputes, 63 with delivery problems, 461 with advertising and sales issues, and 34 due to a guarantee or warranty issue. The BBB has also added a note stating that it has received many complaints regarding Square’s fund withholding procedure. Square has responded by quoting its Terms of Use policies and referring to the help section of its website. The company has successfully resolved 194 complaints, while the remaining 1,190 either were resolved to the dissatisfaction of the merchant or did not receive a final assessment from the merchant.

Due to the company’s high complaint count, rapid growth, and short time in business, we have adjusted the BBB’s rating to a “C” for the purposes of this review.

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Truth In Marketing & Advertising

Key Points

Employs Independent Resellers No
Advertises Deceptive Rates No
Discloses All Important Terms Yes

Square Capital is marketed in two stages: first, as a general product available from Square, and second, as a personalized offer sent to Square users. In terms of its public marketing, Square Capital is presented transparently as a subsidiary service of Square and does not display any “teaser” offers to deceive merchants.

On an individual merchant basis, Square Capital is unique in that merchants cannot apply to the program on their own. Square alone determines which merchants are eligible for Square Capital based on their processing histories, and the company then extends these merchants offers via an email or a dashboard notification. This promotional approach may still allow merchants who should not qualify for cash advances to obtain funding, but at least it still restricts the service to merchants who Square expects to repay their loans. This seems like a responsible way to market merchant cash advances and has earned the service an “A” in this category.

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Square Capital Marketing Example

Square Logo

Our Opinion of Square Capital

Overall, Square Capital appears to be a safer and simpler alternative to conventional merchant cash advance solutions, and merchants generally offer positive reviews of the service. However, there are reasons to be wary. Merchants who qualify for Square Capital may be precisely the kinds of merchants that should consider switching away from Square’s processing solution because they have outgrown it. Additionally, like any cash advance, Square Capital offers a large sum of money up front but severely restricts cash flow in the ensuing months. Merchants are therefore encouraged to plan very carefully for any financing they receive.

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Thank you for reading my review. I hope that it has helped you with your research.

Why I'm Qualified to Write About Credit Card Processing

I'm a former credit card processing sales director who left the industry to start my own a small business. From the time that I starting working in the merchant services industry to when I left to write about it, I've been on the pulse of payments for nearly 15 years. It didn't seem fair to keep this insider knowledge to myself, so built this website to help small business owners research which service providers to use and how to save money on rates and fees. I've reviewed hundreds of companies, read thousands of user reviews, and learned the pricing tricks of every provider. If you have questions about credit card processing, you can find the answers here. I can help you save money with your current merchant account or help you find a new one. Message me here to get started.

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5 Reviews Leave Your Review for Square Capital Below

  1. Brenda says:

    I really don’t like square at all. I’m not sure why are they even still in business. I purchased a square, For my at home hair salon and after 4 swipes for my girls to pay square permanently deactivated my card reader due to “the frequent amount of activity on my account ” really… The was a quick end to my small card success. Plus they never gave me my 10$ for purchasing the damn thing. SQUARE YOUR BUSINESS IS HORRIBLE!!!!

  2. Carolyn Dunegan says:

    I recently borrowed $7800 from square capital and am a long-term square terminal merchant. I was stunned when my loan came through for almost $1000 more at $8800 because of a “flat fee origination fee” of $975 added to it. Shame on square this was not clearly stated in their email exchanges nor was the higher amount of $8800 Stated in a clear language in our emails until the loan was finished. This makes the $7800 at 10% plus a $985 origination fee truly a loan at about 23% such an incredible amount of agreed and near thousand dollar origination fee on only $7800 very sorry I got involved with this.

    1. Mark watkins says:

      Apparently you did not read everything. It’s written clearly and even in bold, telling you how much you would have to pay back. I would say read the fine print, but in this case it’s in bold large print, Square makes it very clear, you would have to be blind to miss it. It’s really a great deal considering back loan options and their interest rates.

    2. Lacie Herndon says:

      I agree with Mark Watkins. It is CLEARLY STATED IN BOLD as to what amount you’ll be getting and what the total payback amount will be. I’m not sure how you missed it. I am sorry you feel like they “tricked” you….I have never felt that I wasn’t fully informed during the past THREE square capitals we have agreed to.

  3. Jon says:

    What if I changed ownership of a business and inherited their square account, which they took $2500 out before I took over. Am I liable to pay off that cash advance? or would the previous owner be the one held accountable?

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