Mobile point of sale platform Square announced on Tuesday that it has secured an investment from Victory Park Capital to expand Square Capital, its small business financing program.
Square Capital was launched in May 2014 to help independent businesses access growth capital. The program hands out capital each week to small businesses already using Square, and with the new investment will be able to extend “hundreds of millions of dollars to tens of thousands of additional sellers who need capital to grow.”
Square Capital is available to merchants based on processing volume and square history. When a company enrolls in Square Capital, the capital is directly deposited into their account and they pay off the loan with a portion of their card sales.
According to Square, more than a third of merchants who have completed their first Square Capital advance have renewed for a second round of capital in order to make additional investments.
The program makes a lot of sense for Square as the small business ecommerce sector continues to heat up. Just last week, Yahoo relaunched its ecommerce platform Yahoo Stores with its eye on the SMB sector.
“We are pleased to be partnering with Square and believe they are uniquely positioned to serve their merchant base with another best in class product,” Brendan Carroll, partner and co-founder, and Dan Schwartz, managing director with Victory Park Capital said. “We’ve been tremendously impressed with Square Capital’s data-driven approach to merchant finance, and we are confident they will achieve substantial growth in a dramatically underserved market.”
Square Capital said its clients have used capital to buy equipment and inventory, hire more employees and add new stores. One of the examples in the announcement is Follicle Hair Salon, which used the capital to move into a larger space and add 12 new salon chairs.