Why does a square loan show a flat fee?

[YME86]

Why does a square loan show a flat fee? Also what is the purpose of the flat fee?

[ryanwanner]

Square Capital loans aren't based on an interest rate, @YME86. Instead, square charges a flat fee that you pay back through the span of the loan. As an example, if you took a loan for $850, square would charge you a fee of $140 for use of their money. No matter if you pay the loan back early or stretch it to the maximum payback time, you'll still have to pay $990 for the $850.

The fee and your capital payment are then paid back by the percentage listed on the capital page when you're looking at your loan details. Please note that the capital loan payment is in addition to your usual swipe rate. So if you have a loan rate of 3% and you're using the usual Point of Sale, you'll pay 5.75% of each swipe in loan and swipe fees.

Hope this helps!

[AKSNOWFLAKE1]

That answer doesn’t make any sense, so you are telling me not only does square charge an upfront fee of $140, but then the payments to pay back based on a percentage of sales plus you are charging each sale an additional percentage of over 2% added to the regular swipe percentage of 3%? That seems like overkill and double dipping don’t you think ? Why would you charge each sale if you are only using total of sales for that day? Seems excessive...? Unless I’m understanding this wrong? Maybe I need to start charging the customer the 3% then to use their cards in the first place?? 

[Laura123 · Accepted solution]

Hey @AKSNOWFLAKE1 

Thanks for reaching out! There is one flat fee to borrow a loan through Square Capital (not a PPP loan). The loan fee is the difference between the total owed amount and the initial loan amount. The loan fee will never change, regardless of how quickly or slowly the loan is repaid. 

Repayment for a loan through Square Capital occurs automatically. A fixed percentage of your daily card sales is applied to the loan balance until fully repaid. Your repayment rate remains the same, and the amount you pay each day is tied directly to your card processing – you’ll pay more when business is strong, and less if things slow down. To learn more about loan repayment, visit our Support Center.

This fixed percentage that repays your loan through Square Capital is in addition to Square’s normal processing fees. For more information about Square's processing fees, please visit this Support Center article. 

Hope that clears things up! Feel free to contact us directly if you have any further questions.