As recently as the end of last year, Square was preparing for an IPO. In the past few weeks, though, reports have surfaced that the mobile payment startup's filing is now on the back burner, and that Square, experiencing revenue problems, might instead raise another round of funding.

These issues might explain Square's new initiative, Square Capital. 

With Square Capital, Square would offer merchant cash advances, lending its customers capital in return for a fraction of future sales plus a fixed cost, Re/code reported. Although Square has not made an official statement, Re/code reports that the company is pilot-testing Square Capital and got a hold of emails sent by Square to small business owners that outline the initiative. 

Few details are available, but based on Re/code's reporting, Square Capital seems like an option business owners looking for capital should should approach with caution. 

In one of its emails about Square Capital, Square offered a business a $7,300 loan and said it would charge the business an additional $1,022--an added cost of 14 percent. So in the end the total amount the business owner would owe Square in this scenario would be $8,322. 

Unlike typical loans, Square Capital wouldn't have a set payment term. Instead, Square would take a 10 percent cut from the company's credit and debit cards sales on a daily basis until the total of the lump sum and the added fixed cost is reimbursed. That means the time it takes business owners to pay back the loan would be dependent upon the company's business and cash flow.

The importance of this is that merchant cash advances do not have a fixed annual percentage interest rate--a very important stipulation business owners should be aware of. Under this model, businesses could end up with an extremely high or low APR, depending on how much revenue they generate. 

So while businesses might look at Square Capital as a great way to get a little extra cash in times of need, they should also be aware of what they are really signing up for.