Square has provided more than $1 billion in loans to businesses

By Ken Yeung for VentureBeat

In Square’s ($SQ) third quarter earnings, one notable figure that stood out was the fact that the company, as of September, has provided more than $1 billion in loans to businesses through its Square Capital program. This effort comes two years after its launch and, by comparison, matches the speed of competitor PayPal, which hit the $1 billion mark in 2015.

How many businesses have benefited from this program, which aims to provide funding to small businesses to expand their operations, remains unknown as the company keeps that information secret. However, for what it’s worth, Square’s Chief Financial Officer Sarah Friar admitted during the Q3 earnings call that sellers are coming back for multiple rounds of funding: “It’s something we didn’t foresee when we started,” she said.

In the past quarter, Square provided loans to 35,000 sellers. That’s an uptick from the 34,000 businesses that received a loan in the second quarter, the 23,000 that were advanced in the first quarter, and 70,000 for all of 2015. Based on rough “back of the envelope” mathematics, it would indicate that Square Capital has doled out cash to more businesses in 2016 than in 2015, and there’s still one more quarter to go. However, how many original businesses there are is a bit difficult to discern without the full data set.

For small businesses, getting funding can be one of the most challenging things, especially when one of the main sources of capital remains financial institutions. However, with growing prominence of service providers like PayPal and Square, this has been a lifeline for some entrepreneurs. Of course, while not explicitly stated, it also helps build loyalty between merchant and the capital provider. “Square can provide capital in time of need — that’s a lifesaver and you don’t forget it. You stay loyal,” explained Tod Wilson, proprietor behind Mr. Tod’s Pie Factory in an interview conducted in October.

To further that access, Square has tapped into other opportunities, including striking a deal with Chicago-based Victory Park Capital to extend hundreds of millions of dollars to businesses via Square Capital. It has also partnered with Upserve to attract restauants and others in hospitality and food and beverage industries.

With a capital investment service, Square can play the “good corporate partner” card that shows small business that it’s more than a payment provider, but also one that will be there to help them mature. And going after the future upmarket merchants would likely increase its gross payment volume (GPV) that has steadily been increasing for at least the past three quarters. Friar remarked on this saying that as sellers get larger, they may want something a bigger loan with different repayment models. This could pave the way for potential new growth opportunities for Square Capital.

First appeared at VB