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This “merchant advance” business, in a (hopefully) less predatory form, is driving revenue at Square and Stripe. I would like to see some comment from someone l
by thr0284way 8y ago
This “merchant advance” business, in a (hopefully) less predatory form, is driving revenue at Square and Stripe. I would like to see some comment from someone like Patrick on how they are going to help reform this mess. They’ve got the resources to do it, and if they don’t they will get lumped in as part of the problem when regulation finally arrives.
- mtw 8y agoI don't get this. What is the merchant advance product that Square and Strip have to compete against this?
- cowsandmilk 8y agoNot sure how they actually classify it, but Square does have Square Capital, which is a product that gives loans to small businesses. It is different than many loans most are used to in that it uses a "Factor Rate" rather than an APR. You pay back the same amount, regardless of how long it takes you to pay. Daily payment is a percentage of what you process through square in a day and are automatically taken out, so you won't miss a payment. Due to the oddity in how you pay, and the use of factor rates, it requires knowing your business really well to understand what the APR will be. And the better your business does, the higher the APR as you will pay the interest sooner. In contrast, a traditional business line of credit, you will typically have an upfront APR and doing better means you pay it off sooner and pay less interest. edit: and to be clear, I'm confident that Square doesn't do the scammy practices in the article.
- cm2012 8y agoThe big companies like Square, OnDeck and Kabbage don't do this practice. It's the hundreds of thousands of scammy broker shops.
- sdinsn 8y agoWhat are you talking about?