Small businesses do not have access to the large scale cheap financing options that big corporations have. In fact, financing day to day operations while growing their business can be a real struggle, even when small business owners are ready to pay high interest rates.

Square, the mobile payments company, allows small businesses to take credit cards by swiping customer credit cards using a small square device attached to the audio jack found on mobile devices. Also, Square is lending money to its customers through its Square Capital program. Please, watch an interview (2 min) with Square co-founder Jack Dorsey (also Twitters CEO) for more details.

Essentially, the business owner clicks on a link in the Square Capital app to let Square know that the business would like to borrow a certain amount of money. Square Capital calls this step requesting capital. The next morning, the funds are deposited in the checking account of that business. The business pays Square back the funds by having a certain percentage of each days receipts deducted for the payback.

For example, if a business wants to borrow $10,000, Square might charge a total of $11,300 for the loan. Upon approval, the $10,000 is deposited into the businesss checking account the next day and then Square charges 11% of the businesss credit card sales each day until the $11,130 is fully paid. Square says that the advantage of this percentage-of-sales method is that the business does not have to make large payments when business is slow. The percentage that Square charges stays constant until the loan is paid off fully.

Square determines the amount to be charged for the loan and the percentage to be charged each day using data analytics. Each Square account has potentially different terms based on its history and trends.

By the end of 2016, Square has lent $1 billion in cash advances and loans to more than 100,000 businesses. 92% of Square Capital loans were for amounts under $50,000, with the majority of loans originating from merchants in the Southwest and West parts of the United States. The average loan size was $6,000.

In the example given, the business borrows $10,000 and pays back $11,130 by paying 11% of its credit card receipts each day until paid in full. Is the 11% the interest rate charged?

A. Yes
B. No