Square says Australia will be the first global market, outside of the US, where it will launch its lending product.
“It’s no secret that small businesses in Australia have historically faced huge hurdles when it comes to accessing formal forms of funding,” said Samina Hussain-Letch, Head of Industry & Payments at Square Australia. “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.”
“As the Australian economy recovers from the effects of the pandemic, and government stimulus payments begin to dry up, small businesses need our help now more than ever to continue to run and grow their businesses, while creating jobs,” she said.
Square cites research it commissioned which found that more than half of small businesses in Australia have been negatively impacted by the COVID-19 pandemic, with more than a quarter seeing revenue losses of more than 50%.
“There’s never been a more important time for more choice in the lending market, and so we’re delighted that we can offer our Australian sellers simple and quick access to funding through Square Loans,” Hussain-Letch said.
Square says that by using historical transaction data, Square Loans has a straightforward application process, where no paperwork is needed, and sellers get their money as soon as the next business day.
“Businesses will have one clear upfront loan fee which will automatically be paid back as a set percentage of daily card sales on Square — so they pay more back when sales are strong and less if things slow down. Unlike the structure of traditional loans, the cost to the seller never changes, regardless of how long it takes them to repay Square,” notes Square.
Jordan Walker, owner of Dexterity Salon in Ballarat, Victoria, was part of an early access program for Square business loans in Australia, and used the funds to invest in expansion and to capitalise on a successful COVID-pivot.
"Before COVID, we were growing strongly and were ready to expand our physical foot-print and double our salon space, while bringing on more staff and apprentices,” said Walker. “However, we were forced to put these growth plans on ice. Instead, we pivoted and opened a successful retail channel that allowed us to bring in some revenue while our doors were shut.”
“Our Square Loan helped us to buy inventory to keep money coming through the door, and has enabled us to now start to expand our business, as we had originally planned.
“When COVID restrictions and other factors are moving and changing so quickly, we were lucky that our Square Loan was so quick and simple. We didn’t have time to provide reams and reams of paperwork.”
Square says its research has highlighted that only one in four Australian small businesses have ever accessed any form of formal funding, such as a business bank loan, but two thirds of business owners have relied on private sources of funding, such as personal credit cards or borrowing from friends and family.
The research also found that business owners were even less likely to have accessed formal funding, and more likely to have used personal finances, if they were women or aged under 40 years - and as the country recovers from the COVID-19 pandemic, one in five businesses intend to apply for a formal loan.
“Many small business advocates have acknowledged that traditional lending processes in Australia aren’t flexible enough for small businesses,” said Hussain-Letch.
“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.”
According to Square, since the initial launch of its loan product in the US, it has facilitated more than USD$8 billion in financing to more than 435,000 small businesses.
Square says it expects to see similar momentum in Australia as local businesses continue turning to the platform as the engine to run their operations.
Square recently added a number of products and services to its Australian portfolio, including an all-in-one payments processing device, dedicated point-of-sale software for retailers and restaurants, and deeper functionality for its Online Store to adapt to the changing business environment.