Celebrated US fintech to launch SME lending product in Australia

by Mike Wood15 Apr 2021

Square, one of the most recognisable fintech start-ups in recent years, are to enter the loan space in Australia through a new financial services product, Square Loans.

It will be their first venture into financial services, following on the back of their lending product in the United States. Their US arm has already financed over US$8 billion in loans to almost half a million small businesses.

“The timing of the launch is really intentional, as are our reasons for bringing the product to Australia,” said Samina Hussain-Letch, Head of Industry & Payments at Square Australia. “It’s our first financial services product to launch here, and the first time we’re launching outside the US. The timing is very intentional because we’re now seeing businesses need to access alternative forms of lending more than ever. Coming out of COVID, businesses are in recovery mode and are often underserved. There’s often big hurdles in accessing capital and Square is here to fix that gap.”

“We’ve been testing the product for the past couple of months and we’re planning to make it available this quarter. The whole premise is to make access to capital fair and flexible. It’s created by the huge amounts of data that we have on our sellers, which allows us to make really responsible lending decisions. In a traditional loan application, there’s loads of paperwork and and often personal guarantees, for example against a family home. We’re not asking for any guarantees for loans up to $75,000 and there’s also no paperwork involved.”

Square are looking to draw on their reams of client data, generated through their sales product, to help them improve turnaround times.

“We are making decisions based on the data that we have on our sellers and offering them a loan,” said Hussain-Letch. “If they choose to accept or to accept less than what we are offering, they can do that within three clicks and apply for the loan. Once they’re approved, they get the funds the next business day.”

“Something that is quite different too is that there’s no interest rate ever, it’s just one fixed fee that the seller is told about up front when they apply and can be paid over the life of the loan. The repayment – and this is the part that I love the most – is based on a percentage of the sellers daily sales. So it flexes with how busy they are: if they’re having a busy period, they’ll pays back more, and if they’re having a quiet period, which for many can be seasonal, they pay back less.”

“We started with a little square white reader back in 2016 in Australia, and since then we’ve launched 20 products to market. Everything we do is about serving sellers to help them grow their business. Our original product was about accepting payments and making that really simple. It was about reducing barriers to entry: people could walk into an Officeworks, pick up some hardware for under $60, download the app and away they go.”

“What we’ve launched since then is more product, both hardware for more sophisticated sellers and software specifically designed to help software, as well as processing payments, which we do third party.”

While the lending product is new territory for Square, it is informed by the same philosophy that has taken them to this point.

“We continue to launch products that are there to help the ecosystem of products that sellers need to start, run and grow their business,” said Hussain-Letch. “Loans are a bit of a different product, moving into financial services, but they are absolutely something that small businesses need access to. Through our research, we know that accessing capital is hard for small businesses. 40% of business haven’t got access to loans, sellers under the age of 40 and women find it hard to access loans, so we’ve launched a product that’s there to make it really simple and fair.”