Square's program to advance money to small businesses is growing like crazy
As its IPO road show gets underway, one of the points the company will likely boast is the tremendous growth of its small business financing arm, Square Capital.
In only three months, the company has advanced more than $75 million to small businesses.
You can see that growth by comparing its original S1 filing with its amended S1, filed late last week to include for its third quarter results.
Square reported $225 million in advances through the end of June. That increased to $300 million across 50,000+ advances at the end of September. Prior to the S1, the last number we'd heard was $100 million through 20,000 advances in April.
That seems to be translating directly to rapid growth in Square's "Software and data product revenue" segment. That segment nearly doubled its revenue in 3 months, from $20.9 million in revenue through June to $35.6 million through September.
"Square Capital demonstrates how our services can rapidly reach significant scale through a combination of strong demand and our direct, ongoing interactions with our sellers," the company writes in its S1-A.
Capital doesn't contribute a "significant amount of revenue" to Square's overall business yet, but the company says in the S1-A that it expects that it "will contribute a larger portion of our total revenue over time."
Square Capital lets eligible businesses request an advance, which they then pay back (plus a percentage on top) slowly: Square simply takes a small percentage of its sales every day. So, the business pays more when it's selling a lot of product, and less if it's in a slow period.
The company recently announced the hire of Yahoo veteran Jackie Reses to lead Square Capital.
For comparison, it took Square Capital competitor Lending Club about 4 years to to make $400 million in loans. Lending Club has now swelled to over $13 billion in loans with operating revenue of $115.1 million last quarter.