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Comment by GregorStocks | Hacker News Reader

The example given is a $10k advance with $11k paid back, but the article also says that "fees appear to be 1/8 to 1/10th of what you’d pay a typical loan organization to get your hands on cash." I'm curious how they're defining "fees," since I can't imagine a "typical loan organization" would charge 80% annual interest.

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They also mention 10 months as the term of the advance, and I think that’s for the same $10k/$11k example. Assuming equal payments of $1,100 every month, that would make the APR about 23%.

There’s an element of equity here because if sales are lower than expected, and it takes 15 months to pay back the advance, the APR ends up at only 16%. If sales are higher than expected, the APR would be higher, 34% for a 7-month period.

It's a merchant cash advance. The cost is higher than a traditional loan that you'd get from a bank, because most of the merchants that get these loans wouldn't qualify for a bank loan. The fees can be pretty outrageous (15-80% APR).

If these small businesses could get a loan from a typical loan organization, Square wouldn't have a market

http://www.bloomberg.com/news/2014-05-22/wall-street-finds-n...

The simplicity is probably going to drive their adoption. Typically securing a loan for a business is a lot of paperwork, back-and-forth, etc. In other words, time away from your business. If Square removes all of that, they're leagues above any offering from typical lenders

Solid point

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