Square Inc. has received an investment from Victory Park Capital that it says will allow the company to significantly expand its Square Capital business financing program.
Since unveiling Square Capital in May, Square has invested $50 million of its own money to provide cash advances to more than 10,000 small businesses.
Through Victory Park Capital's support, the San Francisco-based payments technology provider says it can now "extend hundreds of millions of dollars to tens of thousands of additional sellers who need capital to grow."
Square did not disclose specific details of the investment, but company spokesperson Faryl Ury confirmed Square would remain at the forefront as the operator of Square Capital.
More than a third of merchants who have completed their first Square Capital advance have renewed for a second round of capital to make additional investments in their business, Square said in an Aug. 19 press release.
With Square Capital, businesses sell a specific amount of their future card sales to Square and in return receive a lump-sum payment. Businesses automatically pay Square as a set percentage of daily card sales, so they pay more when sales are strong and less if business slow down.
Square leverages its data regarding each business to develop offers with the expectation that sellers will repay their advance in approximately 10 months, though there is no firm deadline for repayment.
PayPal operates a similar business financing program called Working Capital. In addition, alternative finance provider CAN Capital has developed an application interface that allows payments providers to offer financing services.
Square Capital merchants have already borrowed more than $1 billion with Square and have used funds from the program to buy equipment and inventory, hire more employees and add new stores, Square said.
Square spotlighted Follicle Hair Salon in San Francisco as a business that used Square Capital to move into a larger space and add 12 new salon chairs, with each chair bringing in between $5,000 to $8,000 a month.
"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 with Victory Park Capital, stated in an Aug. 19 press release. "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."