A New Skillset for Tech Startups: Managing Credit Risk

When Cafe Grumpy, the coffee shop featured in the HBO series Girls, needed money to open up a Grand Central Station outpost, it got funds from Square as part of an initiative to give capital to small businesses.

Square Capital, which gives cash advances to companies in exchange for a flat fee and was formally introduced this week after a trial period, pushes Square into the alternative lending business. It’s a hot corner of the so-called “fin tech” world populated by dozens of new startups. But it’s also extremely risky, in part because tech founders tend to understand innovation and user experience better than they understand the lending business and credit risk.