Square secures funding to expand its small business financing program

With Square Capital’s first investor, Victory Park Capital, tripling its original investment, and with new money from investors including Colchis Capital, Square will be able to facilitate lending this year to a number of businesses, many of which have been neglected by traditional financial institutions.

In April 2015 only, Square advanced nearly USD 25 million in capital. The program helps businesses grow by giving them access to funds. More than 80% of merchants who have completed their first Square Capital advance have renewed for a second round of capital to make additional investments in their business.

Square reaches out to businesses eligible for financing, using risk modeling and machine learning. And the company continues to provide other new financial services to businesses, including a Chargeback Protection program to help them with disputed purchases.

With Square Capital, businesses sell a specific amount of their future card sales to Square and in return receive a lump sum payment. Businesses automatically pay Square as a set percentage of daily card sales, so they pay more when sales are strong and less if things slow down. The total cost to the seller never changes, regardless of how long it takes to pay Square.

Square isnt the only payment company getting into small business lending, as PayPal launched a similar service, PayPal Working Capital, in 2013.