Square to roll out interest-free business loan to Australia

US-headquartered lender Square has just announced plans to expand its business loan product to Australia, in an effort to reduce the red tape around accessing additional working capital. 

Square’s decision to move beyond its domestic market came in light of its own research. Its survey found that more than half of Australian businesses have been negatively impacted by COVID-19 and yet only 1 in 4 business owners have accessed formal forms of finance like business loans. 

Meanwhile, a far larger portion of respondents - two-thirds - have relied on more private sources of funding, such as personal credit cards or borrowing from family and friends.

“It’s no secret that small businesses in Australia have historically faced huge hurdles when it comes to accessing formal forms of finance,” said Square Australia’s head of industry and payments, Samina Hussain-Letch.

“They’re often forced to pour over piles of paperwork, provide years of financial information, and put up personal guarantees that can be riddled with red tape.” 

So, what’s the solution to these barriers? That’s where Square Loans comes in. 

How does Square Loans work? 

There are a couple of things that make Square Loans stand out. 

Firstly, it comes with no ongoing interest rates. Instead borrowers are charged one fixed loan fee (on top of the loan amount), which stays the same no matter how quickly or slowly you make repayments. 

Another of Square Loans’ big points of difference is its repayment structure, where the loan is paid back as a set percentage of daily card sales that you’ve made through Square. Essentially this means the daily cost of your loan varies depending on your cashflow, so you would repay more when sales are strong but less if things slow down.

The main requirements are that you pay back at least 1/18 of the initial balance every 60 days, and you have a maximum 18 months to pay out the loan.

“Many small business advocates have acknowledged that traditional lending processes in Australia aren’t flexible enough for small businesses,” Hussain-Letch said.

“Overly onerous and lengthy processes from big banks will act as a deterrent to small businesses and will force many to borrow from less secure means. What we’re bringing to market solves that issue.” 

Square says its loan application involves no heavy paperwork, with sellers able to receive funds as soon as the next business day. 

Where else can I access fast funding? 

Square isn’t the only business lender promising fast loan application and approval speeds. In fact, a range of non-bank lenders including Moula, Prospa and Zip have also said that their online applications could take as quick as 10 minutes, with approval that could be possible in 24 hours. 

Some of these lenders are part of phase two of the government’s SME Loan Guarantee Scheme as well. Under this scheme, the government is guaranteeing half of all eligible loans until 30 June 2021, helping eligible businesses potentially secure lower-cost funding.

Interested in seeing how these options compare to Square, in terms of fees and features? Head on over to our business loans comparison hub to get started today.