• Square is bringing interest-free business loans to Australia in the coming months.
• The loans can be issued to customers with a Square terminal, with card sales determining repayments and loan size.
• Instead of incurring interest, borrowers will pay a one-off fee./strong>
• Visit Business Insider Australia’s homepage for more stories.

Jack Dorsey’s payment company is looking to take on Australian banks with a very different type of loan.

Square revealed on Wednesday it would begin offering business loans in Australia in the coming months, making it the first market outside of the US to have them.

Unlike a conventional loan, Square customers won’t pay interest on it. Instead borrowers will pay back a fee, with repayments fluctuating fixed to business sales. The more card sales that go through a Square terminal, the greater the repayment and vice-versa.

Square claims the structure guarantees borrowers know the full cost of the loan upfront, without having to fork out more if they take longer to pay the loan.

“There’s never been a more important time for more choice in the lending market, and so we’re delighted that we can offer our Australian sellers simple and quick access to funding through Square Loans,” Square’s Australian head of payments Samina Hussain-Letch said.

Nor will customers be required to produce piles of paperwork to be approved for finance. Instead, Square says it can simply extract historical transaction data from its card terminals to understand the financial situation of a business, facilitating 24-hour approvals.

“It’s no secret that small businesses in Australia have historically faced huge hurdles when it comes to accessing formal forms of funding,” Hussain-Letch said. “They’re often forced to pore over piles of paperwork, provide years of financial information, and put up personal guarantees that can be riddled with red tape.”

It marks another major challenge to the dominance of the big banking oligopoly. Last year Australia’s Judo Bank became a $1.65 billion unicorn by lending to the businesses that the big four would not.

Square now appears to be shaking up the same market with a markedly different product. While it won’t disclose Australian customer figures, it has made inroads in the local market, doubling in size each year.

With its own research indicating that two in three Australian businesses are relying on private and often expensive forms of funding such as credit cards, it believes there’s plenty of growth for flexible lending products.

Launching just five years ago, with its recognisable white terminals seen all over Australia, the big banks may begin feeling the heat from its new competition.

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