Stripe’s cash advance service is meant to provide funds to businesses 1-2 days after applying for them. The company has already started to reach out proactively to customers and issue the loans, which appear to be tested under the brand name Advance.
Users are given a fixed percentage rate, taken from daily sales, to pay back the Advance. This means that the minimum amount one pays back can vary daily, based on one’s sales for that day. On the other hand, Square works with Celtic Bank to provide loans through Square Capital. The loans come the next day and range from USD 500 to USD 100,000.
Building a cash advance service will help Stripe diversify its business. Payments — the core of Stripe’s business — generally make a thin margin and require economies of scale. Financing works on a different principle, potentially giving the company a way of making an instant return on money that it already has.
Moreover, issuing business loans, would help Stripe compete against the rest of the payments and financial services pack, including other tech-first companies like Square and PayPal, or against payment and credit firms like American Express, and traditional banks.
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