Good news, bad news, eh @cmeshine. There are a number of reasons that COULD be part of why your new offer was lower.
- Square might be slowing down on how much loan exposure they want to have on their balance sheet. They are, after all, a publicly traded company that has to answer to their shareholders and investors.
- If our sales are flat or at least not growing at a good rate to cover inflation and higher interest, then Square’s algorithm understands that inflation is eating into our available cash to pay bills, etc. Flat sales (or very slowly growing sales) are always red flags to lenders, Square or not.
- Sometimes how long it takes us to pay off our current loans can be a factor. Let’s say that previous loans were paid off with automatic payments in 8-10 months in the past. But for this current loan it took us 12-15 months. That tells Square that our card processing volume can’t keep you with higher loan amounts. Yes, they give us 18 months to fully pay a loan, but they obviously prefer that we pay them off closer to the 12 month mark.
- If our cash/card ratio drastically changes, and cash spikes or is consistently higher than historical for our business, that is another red flag. Since Square must only consider card volume when calculating repayment rates this can become a problem.
Of course, I’m not saying that any of these contributed to your lower offer. I’m just throwing out a few reasons why this CAN happen.
@Marinetx I’m sorry that you are in a position that the absence of a Square Loan is the deciding factor of whether or not you will continue processing card payments with Square. I know it’s not easy to expect something and not have it materialize. But, since you mentioned the economy, I’ll say a few things here.
Square isn’t going to say this, and neither will any card processor who offers MCA loans. But, of course it is the economy — specifically the lending market worldwide, the persistent high interest rates for borrowing, and the worry of the market that a recessions is still possible. Of course, this week the Fed gave strong indications that interest rates will be going down soon, which is good. And, all indications are that the much feared recession is not going to materialize, thankfully. But, even with those good signs we have a ways to go before nerves are calmed.
Square, like any other publicly traded business, has to balance a lot when making loans. First, they have shareholders who will be very upset if Square’s balance sheet isn’t healthy — ie - has too many loans that are considered risky. Also, being too heavy in outstanding loans isn’t considered healthy for a publicly traded company.
I’ll also mention that the loan status page is not and never has been a GUARANTEE of a loan offer. It is there to help us quickly see problems with our accounts so that we can hopefully correct them. But I’ve read more than a few posts here from sellers who have been “green” for months and still not been offered a loan. There can be many factors for this — flat sales, more cash sales than usual (which hurt loan offers since loan repayments are from card sales). The point is that this page is what it is — a guide and a checklist. Being green does not mean that loans will come, and that should not be read into anything on that page. When the loan algorithm is ready to offer a loan, it will, and not one — not even Square employees — can do anything to influence or override that. That is a fact of life.
Lastly, I would caution against jumping ship to a new processor solely on the basis of possible loan offers. First, they all promises that you’ll get loans, but all of them work exactly the same way as Square does. When their algorithms are ready to offer loans, they do, and it’s a completely automated process. Also, switching processors effectively resets the clock and new sellers rarely get loan offers before 6 months or even a year. Further, they all look at processing history with them, only. So loan offers from a new processor will be much lower than what you could possibly get eventually with Square. The grass is never greener on the other side, I’m afraid. It’s just more grass.
I know you are frustrated. But don’t do anything now that you’ll regret later. I know business owners who have and understand now how foolish they were. If you really need a loan for your business to survive, then you should reach out to your local bank. SBA loans are pretty good right now and even though they are taking a while the rates aren’t bad. The Fed will start lowering rates soon which will help all lenders worldwide. It’s just going to take time. You mentioned that you’ve had two loans. That makes you a pretty new loan customer, still. Some have had dozens and even they are waiting longer now, and waiting longer for less money than usual.
Lastly, try to remember that Square is not a lender. They are a card processing company that also lends money for very short-term cash needs. Their lending policies are theirs to make and follow and they do not owe us loan offers, period. Having said that, I hope this helps a little, even if just to convince you that you are not alone. And, in closing, I wish you well and hope things work out for you.
