Square is introducing a new payment option for small businesses to let customers pay for large purchases in monthly installments. Called Square Installments, payment plans can be used for purchases ranging from $250 to $10,000, and customers can choose to pay over three, six, and 12 months. Annual percentage rates will vary from 0 to 24 percent APR.
The feature is available now in 22 US states for businesses using Square, and customers have to be preapproved before they can start financing. Most customers will be able to see if they’re approved instantly, but there will be cases in which approval can take one to two business days. Once approved, customers will receive a one-time use digital card number they can show to merchants to pay for their purchases. There are no service fees involved, and customers will be able to see the total cost of their payment plans up front for each monthly payment available.
All loans are issued by Square Capital, which also offers business loans to merchants. Square Capital will automatically deduct your monthly payments from your debit card, and it’s also what will show up on your credit report when you become approved for Square Installments.
Square is moving into the consumer lending space as monthly installment options are becoming more popular. Companies like AfterPay and PayPal’s Credit let customers buy now and pay later, but the payment options have usually been limited for purchases from large retailers. Square Installments is now aiming to fill that space by offering the same payment options to small businesses. That puts Square in direct competition with PayPal co-founder Max Levchin’s startup Affirm, which last year launched a mobile app that generates one-time card numbers for online purchases that customers can then pay back in installments.