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.
Hey @Fpfl21. I can give you some insights but of course no concrete answers.
First, loans ARE going out. I’ve gotten a half dozen offers in the past few months, and I know others who have.
Second, almost no one with a current loan is getting new offers at 70-90% currently. This has been the case for well over a year and I don’t see it changing anytime soon. Why? Because if you read the news, or follow the financial journals, you’ll see that all lenders are being very conservative about how much they have on their balance sheets. Rates with the Fed are still high and will only come down slowly. There is talk every day of a looming recession, which I think is crazy since the signs for recession just aren’t coming together. But markets don’t like that kind of talk. The point is Square is not the only lender who is holding back. I’ve seen sellers here waiting until the 90% range to get a new offer, and more than a few who completely paid off their existing loans and then waited a while before a new offer showed. This, as they say, is just the way it is. The lending market is being highly conservative and cautious. Hopefully, that will change soon.
One more thing. This year I realized that my cash flow and sales were more than sufficient to qualify for a traditional Line of Credit with my local bank. I applied — solely on the strength of my business credit and profile — and was approved. Many of us find here that there comes a point where the Square repayment terms (which are, after all, merchant cash advances and not traditional loan terms) just don’t work for us or make financial sense. It’s not the fault of the Square Loans — they serve their purpose quite well and help lots of folks getting started. Anyway, I found that it was a good idea — and finally time — for me to move on from Square loans and find something with more traditional repayment terms, etc. I’ve learned from my decades in business that it’s never a good idea to rely on just one cash/funding source. Trying to have a few options we can draw on when we need them is much less frustrating.
One more thing. It is a common misunderstanding that the loan status screen (all green, etc) is a guarantee of a loan offer. That screen is only meant to highlight issues that might get in the way of loan offers once the algorithm decides that it wants to send us one. But being all green doesn’t mean anything else, and nothing else should be read into it.
The lending market is probably going to loosen up soon. It looks like the Fed is finally going to start lowering interest rates which will be a major help to all of us. At this point, patience is about all we have on our sides until this happens. Since the feared recession did not happen, there is reason for optimism.
I wish you well.
