For over a decade, Square has bypassed traditional lending hurdles by using real-time transaction data rather than static credit scores. By leveraging its unique position in the flow of funds, Square identifies the “lifeblood” of small businesses capital and extends credit to those often deemed too “risky” by legacy banks.
In 2026, Square announced a major evolution in its underwriting models, now extending credit offers to 50% more sellers than were previously eligible.
Breaking the cycle of exclusion
Traditional lending often relies on years of documentation, which disproportionately excludes new, seasonal, or minority-owned businesses. Square’s machine learning models instead analyze live revenue patterns to bridge these systemic gaps.
The impact of inclusive lending (since 2014):
- Total origination: Over $32 billion in loans
- Average loan size: Approximately $10,000
- Women-owned businesses: Received 58% of Square loans
- Minority-owned businesses: Received 36% of Square loans
- Underserved regions: More than half of loans go to businesses in states with the lowest traditional bank approval rates
Solving for “non-standard” business realities
The 2026 update specifically targets three types of sellers that previously fell through the cracks of automated underwriting:
- New-to-Square businesses: The model can now assess creditworthiness within a seller’s first five days of processing
- Seasonal operators: Improved algorithms better understand businesses with significant revenue spikes followed by quieter periods
- Project-based earners: Service providers with irregular, “lumpy” revenue patterns can now be underwritten with greater accuracy
New pathways: short-horizon credit
Square is not loosening its standards; it is shortening the time horizon. While a standard Square loan is typically repaid over 10 months, the new models offer smaller, short-term credit options.
These are designed to cover immediate cash flow needs such as utility bills or urgent inventory purchases.
Early results of the new model:
- Expanded reach: Nearly 50% of sellers taking these new loans had never received a Square loan offer before
- Micro-business focus: 66% of these offers went to sellers with less than $25k in annual gross payment volume (GPV)
- Small business support: 95% of offers went to those with less than $125k in annual GPV
The “flywheel” of shared growth
Square’s repayment model remains one of its most distinctive features: sellers repay more during high-revenue periods and less when business slows.
This flexibility, combined with AI-driven underwriting, ensures that small businesses and solopreneurs have greater access to capital. By focusing on programmatic liquidity, Square is positioning its lending arm as a key driver of economic inclusion across diverse communities.
