Payment Processing · Industry
The offer arrives in the dashboard, not the post. You have been processing for a year, sales are steady, and one morning there is a card in the corner of the screen: you are eligible for $18,000, deposited tomorrow, with no interest, just one flat fee. You can take it in three clicks and never speak to a human being.
The terms are not hidden. Square, PayPal, Stripe, Shopify and Toast all publish how their loans work, and the mechanics are almost identical across the five. What none of them publishes is the number a bank would be obliged to put on the same offer, and the reason is that the number is not fixed. This article works it out from the providers' own examples, as of September 2026, and sets out where the real terms sit.
Every one of these products has the same three parts: a lump sum, a fixed fee added to it on day one, and repayment taken automatically as a percentage of your sales until the total is paid. The details differ, and they matter.
Square Loans range from $100 to $500,000 and are issued by Square Financial Services, Inc., Block's Utah-chartered industrial bank. Square's own repayment page gives the example: a $10,000 loan with a $1,300 fixed fee, $11,300 owed. Repayment starts two business days after origination as a fixed percentage of gross card sales — including tips and taxes, invoices, ACH and Cash App QR payments — and the page is explicit that the rate "applies in addition to Square's processing fees". There is no collateral below $100,000; above it Square may file a UCC statement against business assets, and loans over $250,000 need a personal guarantee. Applying does not affect your credit score and Square does not report to bureaus, though Square Financial Services may run a soft check. Funds land in one to three business days, or instantly into Square Checking.
PayPal Working Capital is issued by WebBank. First loans run from $1,000 to $250,000 and repeat borrowers can go to $400,000. You need a PayPal business or Premier account at least 90 days old, with at least $15,000 of annual PayPal sales on a business account or $20,000 on a Premier one, and no outstanding Working Capital balance. You choose the share of PayPal sales that goes to repayment, and every 90 days you must have repaid at least 5% of the total — loan plus fee — if the loan is expected to take twelve months or more, or 10% if it is expected to take less. PayPal's page promises "no periodic interest or hidden fees", no late fees and no personal credit check, and notes the product is currently unavailable to businesses in certain states.
Stripe Capital offers both loans, issued in the US by Celtic Bank or Lead Bank, and merchant cash advances, provided by YouLend. Its illustrative examples put the fee at a flat 10% — $1,500 on $15,000, $2,000 on $20,000, $2,500 on $25,000 — with the share of sales rising from 9% to 12% to 15% as the amount grows. Funds typically arrive the next business day; there is no impact on personal credit; and each payment period has a minimum amount due, debited from your bank account if sales fall short.
Shopify Capital in the United States is issued by WebBank and, unusually, offers two fee structures. The fixed-fee loan is the familiar one: Shopify's help centre example is $100,000 at a 13% fee, so $13,000 whether you repay in three months or eleven. The monthly-fee loan charges a fixed dollar amount each month the balance is open — the example is $1,400 a month on $100,000, so $4,200 if repaid in three months and $15,400 in eleven. Repayment is a daily percentage of all sales on the account, whatever the payment method, calculated on each day's paid orders including shipping and tax and "regardless of whether the order was later refunded or canceled". Two milestones apply — 30% of the total by six months and 60% by twelve — inside an 18-month maximum, and a UCC-1 may be filed. For loans accepted on or after 9 March 2026, repayments come straight out of the Shopify Payments balance before payout rather than by bank debit.
Toast Capital, also issued by WebBank, lends from $1,000 to $300,000 to restaurants on target terms of 90 to 360 days, with a hard maximum of 60 days beyond the target after which any balance is collected by ACH. The 270- and 360-day loans carry a repayment milestone schedule checked every 30 days. Toast says there is no credit score requirement, no personal guarantee, no application, prepayment or late fees, and one fixed fee that "will not change regardless of how long it takes to repay the loan". Its page was last updated on 14 August 2026.
Every one of these providers says there is no interest, and every one of them is right. The fee is a fixed dollar amount, decided before you accept, and it does not grow. What is missing is the other half of any cost of borrowing: how long you have the money. Interest is a price for time. A fixed fee is a price for the loan, whatever the time — and that means the same fee is a very different annual cost depending on how fast your sales repay it.
Take the 13% that appears in both Square's and Shopify's examples and assume the loan is repaid in equal daily amounts. Repaid over eighteen months, the fee is about 17% APR. Over twelve months it is about 25%. Over six months it is about 50%. Over three months it is roughly 99%. Stripe's illustrative 10% works out at about 19% over twelve months and 39% over six. These are the figures a bank would have to print on the same offer, and they are the ones to hold in your head.
Notice the direction. A conventional loan gets cheaper if you pay it off early. These get more expensive, in annual terms, the faster they are repaid, because the fee is the same and the time is shorter. Square and Shopify both say so plainly: prepayment is free, and it does not reduce what you owe. A busy season that clears the balance in four months has not saved you money; it has turned a 25% loan into a 75% one.
Shopify's monthly-fee structure inverts this. At $1,400 a month on $100,000, the cost is about 1.4% a month — roughly 32% APR — however long the loan runs, and repaying early genuinely reduces it. Against the 13% fixed fee, the monthly structure is cheaper if you clear the loan in under about nine months and dearer after that. Which one suits you depends entirely on how confident you are in your sales forecast, which is the question the fixed-fee design is built to let you avoid.
In some states, it has to. California's commercial financing disclosure regulations, in force since December 2022, require a provider of sales-based financing to disclose an APR or estimated APR, and a further amendment effective 1 January 2026 requires the APR to be stated whenever any rate, charge or pricing metric is stated on an offer of $500,000 or less. New York's Commercial Finance Disclosure Law has required the same since 1 August 2023. By March 2026 ten states had some form of commercial financing disclosure law, though not all reach an APR: Texas HB 700, in force since 1 September 2025, requires a signed disclosure of the total repayment amount, the finance charge and all fees on sales-based financing under $1 million, and stops short of an annual rate.
That is why Shopify's application has an optional "Financial Disclosures" document "based on your location in the United States", and why a merchant in Los Angeles and a merchant in Tulsa can be offered the same loan with different paperwork. If you are in a state that prints the APR, read it — it is the honest number. If you are not, use the table above.
The fee is what the loan costs. The daily percentage is what it does to your business while you repay it, and it deserves more attention than it gets. Square applies its rate to gross card sales including the sales tax you are collecting for the state and the tips you are passing to staff, and then charges its processing fee on the same transactions. Shopify applies its rate to every paid order on the account, including ones you later refund, so a returned $500 order still sends $50 to the lender at a 10% rate. At Stripe's illustrative 12%, a $1,300 day sends $156 to the loan before anything reaches you. Layer that on top of a rolling reserve, if your processor is holding one, and the cash that actually arrives can be a fraction of what you sold. Our guide to reserves and holds covers the other half of that squeeze.
The percentage is also fixed to the account that took the loan. Square's page notes that sales on another Square account or location do not repay the loan unless you add that account as a payer, and that if you miss the minimum, the repayment rate on your daily sales "may increase". PayPal's is blunter: miss the 90-day minimum and go into default, and "your entire balance could become due and limits could be placed on your PayPal account". The lender and the processor are, for practical purposes, the same counterparty, and the collateral is your ability to take payments.
Four of the five products above are loans in law, issued by a bank, with a stated maturity and minimum payments. Stripe also offers a merchant cash advance through YouLend, and Shopify's help centre describes Capital as offering both. The difference is legal rather than practical: a cash advance is structured as a purchase of your future receivables at a discount, not a loan, which historically kept it outside lending law and usury caps. The state disclosure laws above were written largely to catch that distinction. For your cash flow the two behave the same way; for your rights if things go wrong, and for what shows up on a credit file, read which one you have been offered.
There are legitimate uses. The money arrives tomorrow, there is no credit score requirement, the paperwork is three clicks, and on a loan you intend to repay slowly the annual cost is in the range of a credit card, not a loan shark. A restaurant buying a $12,000 walk-in that will still be running in ten years, repaid across eighteen months of ordinary trade, is paying about 17% for the convenience. That is a defensible decision.
It is a poor decision when the loan will be repaid fast, when the need is a one-off gap you could cover with a bank line at a third of the cost, or when the percentage on gross sales will squeeze the cash you need to trade. It is a very poor one when you take a second before finishing the first: Square nets the old balance out of the new loan and charges the full new fee on the full new amount, so the $1,250 you still owed is refinanced at 13% again.
The processors did not invent the fixed-fee advance; the merchant cash advance industry did, and the processors' versions are cheaper, clearer and better behaved than most of that industry. But the design is the same design, and it works for the lender for the same reason: a fee looks like a price, and a price does not look like a rate. If you want to see where the repayment lands on your statement, start with how to read a merchant processing statement.
