Paid my loan off in the first 2 month cycle

[Hineshospitalit]

Has anyone else paid back a loan this quickly. I thought their wonderful algorithm was supposed to set up the terms to benefit the business. They are literally taking the money back quicker than I can spend what they gave me. One would think Squares wonderful algorithm that reviews us daily would extend a new offer to correct their mistake. I took this out on August 20th and I’ll have it paid off by the end of day today. What crazy is the daily draw is only 11%. How could they have screwed up the offer so badly

[TheRealChipA]

Hi there @Hineshospitalit.. This is not really a problem with Square's algorithm.  It is a potential drawback of merchant cash advance loans, in general. Whenever I get a loan offer, I do two things.  First I plot the daily percentage against my project card processing volume for the next 12 months.  If I see that I have ANY potential to pay it off in less than 6 months, then I do not accept the loan offer.  That's because the "effective APR" is just too high to be of any use to me.  I'm better off putting that money aside over the short term and saving myself the loan charges.

Second, I look at my 12-month pro forma budget.  If I see a steep projected increase or decrease in income and therefore in card processing volume, I usually just ignore Square Loan offers.  Again, the reasons are pretty much opposite sides of the same coin.  On one side, if I pay it off too quickly, I'm costing myself money and cash flow problems.  on the other side, if I'm taking longer than 12 months to pay it off, that means that I was really unable to handle the loan amount to begin with and am, therefore, over extended.  Neither case is great from a business perspective.

The point is that it is not Square's (or any lender's) responsibility to determine if a loan amount is a good fit for our current financial position.  The algorithm just makes sure that we can pay off the loan in a reasonable amount of time -- period.  It's up to us to do the proper due diligence and determine if any loan offer actually makes sense for our business at the time.  It sounds like you probably should have declined the offer, but that doesn't mean Square screwed up.

[Hineshospitalit]

Sorry but your response is off base for one reason. Square says they base the payback over 12 to 18 months. If you reach out to square they say their algorithm is set up to ensure it sets loans that are affordable for the customer to manage. You can’t have it both ways. My processing is the same as it was when the loan was taken out. Don’t specify these terms or basic format if the company has no interest in adhering to it. Sorry but if square is truly using an algorithm one would think during its supposed daily reviews it would catch this and establish a new offer. Not to mention the way this was paid back should trigger a new offer regardless because you are exceeding every expectation 

[Abby_M]

Hi @Hineshospitalit 

Thanks for posting on the Seller Community.

While we aren’t able to extend your repayment length or pause repayment once the minimum is met, we understand how this would be a beneficial feature and allow you to access more of your cash flow during these difficult times. I will share your concerns with our Product team. Please know that we’re constantly working to improve our products and services based on the feedback we receive from our customers.

Square Loans are customized for each seller and your loan offer amount as well as your estimated payback time are determined based on your payment processing volume, account history, and payment frequency. 

Keep in mind that the program is designed to account for unexpected circumstances and that loan payments aren’t deducted on days you don’t make sales.

We appreciate you reaching out and letting us know. Please contact us directly by giving us a call or emailing us so we can take a look and assist!