Square lending

https://www.fool.com/investing/2017/10/30/how-big-could-squa…

Square Capital is Square’s small-business lending platform that makes loans in amounts ranging from $500 to $100,000. did not know they got that big

Square determines eligibility primarily from its customers’ sales history with Square’s payment-processing platform. If a Square customer is eligible for a loan, the company alerts the customer by email, as well as through a notification on his or her Square dashboard.
proactive

Since Square’s lending process is based on its customers’ payment processing activity, the company knows how much revenue their prospective borrowers are generating, and therefore can make the lending decision process far simpler than that of a bank. Quicker for the borrower ,safer for the lender. What’s not to like? Banks can not match that. I suspect this part of Square’s business is not yet seen by most as the innovation that it is. And it is in it’s infancy.

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Sq valuation is stretched. That said they have a lot of levers to pull. Nu target from nomura is 45. As they’re just becoming profitable the market may be valuing sq on future profitability vs p/s. And the tam is enormous. Look at v, ma, Pypl, gpn. And sq brings lots to the table by comparison.

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Since Square’s lending process is based on its customers’ payment processing activity, the company knows how much revenue their prospective borrowers are generating, and therefore can make the lending decision process far simpler than that of a bank. – Quicker for the borrower ,safer for the lender. What’s not to like? Banks can not match that. I suspect this part of Square’s business is not yet seen by most as the innovation that it is. And it is in it’s infancy.

I don’t know much about lending so I apologize if this is a dumb question, but is this really an innovation? No one before made a lending decision based on sales history? Can’t any lender ask for this? Or is the innovation that it is faster and more streamlined?

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I would imagine, esp in today’s heavily bank-regulated environment, that Square can issue a just-in-time loan significantly faster than any bank. Big advantage.

MA and V have this data, but aren’t in the lending biz.

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Bear,

Maybe the bull in sq is really about the payday type loans 1% per week and growing like crazy all underwritten by ai. 0 expense, 1/2 default rate of a bank, 100x the return, AND sq becoming a bank so the $ lent is not coming from an outside 3rd party.

A curious thought Dorsey is in the early stages of figuring out how to monetize twtr. Could become sq part deux. Not in but watching.

This Square Capital program sounds extremely similar to Shopify’s lending program.

Both companies seem to have a fair number of similarities, and are probably co-owned by many on this board (myself included).

I wonder if both will remain independent companies 5 years from today.

Quicker for the borrower ,safer for the lender. What’s not to like? Banks can not match that. I
suspect this part of Square’s business is not yet seen by most as the innovation that it is. And it is
in it’s infancy.

I agree 100%, mauser. I don’t understand so many investors’ fear of, and disdain for, commercial lending
to small or medium sized businesses when those businesses are ones’ own clients. Looking at the
financials of others in similar space, including the credit card companies, rather than raising my level
of fear, raises my level of greed satisfaction. Of course, lenders such as Square won’t likely be
charging 29% interest, but neither will they be lending to any high-risk borrowers.

They have access to all the same data as do banks, except for the possibility of real-time account
balances, plus the experience of direct payment history from these customers and valuable insight into
the inventory flow and seasonality of their customers’ cash flows. Speaking of which, I also see these
moves as strong evidence of managements’ confidence in their long-term cash flow projections. With
proper management, I think this is one of the best possible solutions for what to do with cash, much
better than stock buybacks, bonds, SBC or questionable acquisitions.

The strategy works for me: Bring in lots of cash and put it all to work.

What’s not to like? Banks can not match that …

Nailed it.

Dan
no position yet, wishing Citron would jump in here :slight_smile:

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