Small businesses are the backbone of the economy, but many struggle to secure the funding they need to grow and succeed. Traditional lending institutions often have strict requirements that can be difficult for small businesses to meet, leaving them with few options. Fortunately, alternative lending platforms like Square Capital and Fundkite have emerged to provide a more accessible and flexible funding solution.
Square Capital is a lending platform offered by Square, a popular payment processing company. It offers loans to businesses that use Square’s payment processing services, with repayment terms based on a percentage of daily sales. Fundkite, on the other hand, offers revenue-based financing solutions to small business owners.
Both platforms can be viable for small business owners seeking funding. Here’s what you need to know when comparing your options.
Introduction to Square Capital
Here’s an overview of Square Capital and its offerings.
Brief History of Square Capital
Square Capital is an innovative financial solution designed to help small businesses grow and thrive. Established in 2009, Square Capital features loan products that are facilitated by Square Financial Services, a subsidiary of Block, Inc. By connecting your Square account to this service, you gain access to loan offers based on your payment card processing history and other eligibility factors.
How Square Capital Works
These loans are not only convenient but also flexible, adapting to your unique business situation and allowing for a more personalized financial experience. When you choose a Square Loan, the repayment process is seamlessly integrated into your daily operations. A fixed percentage of your daily card sales is automatically allocated to repay the loan, ensuring that your company’s cash flow remains positive.
Introduction to Fundkite
Below is an introduction to Fundkite and key features to know about.
Brief History of Fundkite
Fundkite is a financial services company that specializes in providing small businesses with quick and efficient funding options. Founded in 2015, the company has helped numerous business owners across the nation obtain the necessary capital for their ventures with over $900 million in funded loans. It currently works with a network of over 1,000 independent sales organization partners to reach small business owners.
How Fundkite Works
The company offers revenue-based funding, which is an alternative to traditional bank loans. Fundkite considers the big picture of your business and not just your credit score when determining your eligibility for funding. It serves companies in the medical, auto repair, manufacturing, pharmaceutical, restaurant, retail, hospitality, and health and wellness sectors.
To apply for funding, simply submit an application and your bank statements. Fundkite then reviews your information and presents you with a funding offer. Upon accepting, provide the required documents, and you can expect to receive your funds swiftly.
Square Capital Vs. Fundkite: Comparison
Here’s a closer look at what to expect with each funding option.
Services Offered
Square Capital offers Square Loans, formerly known as Square Capital loans, to eligible businesses using their payment processing software. These are short-term financing options to help businesses grow.
Fundkite, on the other hand, provides flexible lending solutions to help foster small business growth. They feature rapid approvals and quick funding times to make securing the funds you need a simple task.
Features and Benefits
Square Capital:
- Integrated with Square payment processing
- Automated repayment process
- No upfront fees, ongoing interest or late fees
- Transparent pricing
Fundkite:
- Flexible terms
- Fast approval and funding process
- No collateral required
- Dedicated account managers
Interest Rates
Square Loans charge a fixed fee instead of ongoing interest. However, its financing options can be expensive compared to other lenders.
Fundkite does not charge interest on its financing products. However, borrowers receive a factor rate that can also be more expensive than a traditional loan.
Fees and Penalties
Square Loans do not come with upfront fees, ongoing interest or late fees.
Fundkite does not assess late fees and other penalties (if any), nor are they mentioned on the website.
Eligibility Criteria
To be eligible for a Square Loan, your business must already use Square for payment processing, and you must receive a loan offer through your Square Dashboard. Unfortunately, you can’t apply for a loan without receiving an offer through the dashboard.
Fundkite requires you to operate for at least six months as an LLC, S corporation or limited liability company. You must also have a credit score of 500 or higher, at least $10,000 in gross monthly sales and a business bank account. Fundkite also requires you to pass a background check and specify how you’ll use the funds.
Repayment Process
Square Capital collects repayments automatically as a percentage of your future Square payments. This method ensures that repayments are proportional to your company’s revenue.
Fundkite collects automatic payments from your credit card, business bank account or via ACH on a daily basis.
Customer Reviews and Feedback
Square Capital has mixed reviews, with some users finding value in its loans and others criticizing borrowing costs.
Fundkite has a reputation for a great work environment, but there is limited information available regarding customer feedback.
Where Square Capital Stands Out
One significant advantage of Square Capital loans is that they’re tailored to your business needs. You can borrow up to $250,000, depending on your business performance and eligibility, and receive funds within one to three business days following approval. While the loan terms are quite flexible, you can expect a maximum term length of 18 months, which allows you to repay the borrowed amount within a reasonable time frame.
Furthermore, Square Capital has an edge in the industry by providing you with a simple and straightforward application process. Since you are already a part of the Square ecosystem, they can automatically evaluate your eligibility for the loan, saving you time and effort.
Where Fundkite Stands Out
Fundkite sets itself apart with its unique approach to funding and a focus on providing comprehensive financial solutions as opposed to just loans. As a small business owner, you may find their services helpful as they cater to your needs and offer multiple financing alternatives, including merchant cash advances, which may better suit your company’s funding needs than traditional loans.
Regarding eligibility, Fundkite understands that conventional credit score requirements may not accurately reflect your business’s potential. Instead, they emphasize the importance of evaluating your business performance and cash flow to determine your funding suitability. This approach can significantly improve your chances of getting the financing you need, even if your credit score isn’t perfect.
Beyond providing flexible funding options, Fundkite stands out in how it manages the repayment process. Typically, repayments are made as a percentage of your daily credit card sales. This structure offers you a more manageable payment plan, as it aligns with your company’s revenue flow.
The Bottom Line: Square Capital Vs. Fundkite
If your business heavily relies on Square for processing payments, Square Loans might be the better choice due to its integration with your existing system; however, if you desire more flexibility and aren’t tied to Square. Fundkite could be a better funding source with more freedom.
Ultimately, the choice between Square Loans and Fundkite depends on your business’s specific needs and circumstances. Make sure to research both options thoroughly, and consider reaching out to respective customer support teams for guidance to make the best decision for your business’s financial health.
