Business loan

Square to Deploy Interest-Free Business Loan in Australia


Square, headquartered in the United States, just announced plans to expand its business lending product to Australia, with the aim of reducing red tape in accessing working capital additional.

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

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

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

“They are often forced to fill out heaps of paperwork, provide years of financial information and put in place personal guarantees that can be riddled with paperwork.”

So what is the solution to these barriers? This is where Square Loans comes in.

How does Square Loans work?

There are several things that make Square Loans stand out.

First, it comes with no current interest rate. Instead, borrowers have to pay a fixed loan fee (in addition to the loan amount), which stays the same no matter how quickly or slowly you make the repayments.

Another big difference from Square Loans is its repayment structure, where the loan is paid off as a fixed percentage of the daily card sales you make through Square. Essentially, this means that the daily cost of your loan varies with your cash flow, so you would pay off more when sales are strong, but less if things slow down.

The main requirements are that you pay off at least 1/18 of the original balance every 60 days and have a maximum of 18 months to repay the loan.

“Many small business advocates have recognized that traditional lending processes in Australia are not flexible enough for small businesses,” Hussain-Letch said.

“The overpriced and time-consuming processes of the big banks will act as a deterrent to small businesses and force many of them to borrow from less secure means. What we put on the market solves this problem.

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

Where can I access quick financing?

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

Some of these lenders are also part of the second phase of the government SME loan guarantee program. Under this program, the government guarantees half of all eligible loans until June 30, 2021, helping eligible businesses potentially obtain lower-cost financing.

Want to see how these options stack up against Square, in terms of fees and features? Head over to our business loan comparison center to get started today.