66% of Square's newly eligible borrowers process under $25K per year. Most MCA shops priced that segment out years ago. Square just priced itself in, with zero-doc offers, day-one underwriting, and $7B in 2025 originations behind the model.

What happened: Square announced on March 27 that upgraded machine learning models now extend loan eligibility to 50% more sellers, approximately 250,000 additional merchants, including seasonal businesses, project-based earners, and merchants processing their first payment on the platform.¹ The previous underwriting model required one to two months of transaction history before extending an offer. The new model underwrites on day one.

The numbers: Square has originated $32B in small business loans since 2014, with $7B funded in 2025 alone, according to deBanked.² Average loan size sits at approximately $10,000. Here is the number that reframes the threat: 66% of newly eligible offers go to sellers with under $25K in annual gross payment volume, and 95% to those under $125K.³ Nearly half of new loan recipients had never received a Square Loan offer before. Square is not competing for your $100K deals. It is building a lending floor beneath the segment most alt lenders already walked away from.

Why this matters to you: If those micro-merchants grow, and Square's data says many do, their next loan will also come from Square. The platform that funded them at $5K will fund them at $50K. By the time they are large enough to appear in your pipeline, they are already someone else's repeat customer.

Andrea Raj, Global Head of Product for Square Banking, told American Banker that the updated model draws on 17 years of historical transaction data combined with 12 months of randomized controlled testing.¹ The system evaluates a new merchant's first customer, order value, and location against the full history of similar businesses in the same geography and category.

"Based on your first customer and what they ordered and how much that check was for that day, relative to all of the other businesses that look the same and in the same geography, we can now predict your likely revenue and rightsize the lending for it," Raj explained.¹

The model previously covered roughly 80% of Square's gross processing volume. The expansion targets the remaining 20%: merchants with irregular revenue patterns who fell outside the older model's comfort zone. Square added shorter-term products with 30 to 120 day terms alongside its standard 9+ month loans, with monthly amortization instead of the traditional daily or weekly withholding.¹

Square's structural advantage is embedded data. Every payment processed through Square's point-of-sale ecosystem becomes a real-time underwriting signal. According to Square's product documentation, the company does not request bank statements, tax returns, or credit reports.³ The processing relationship is the underwriting file.

Industry analyst Aaron McPherson noted that Square's "ability to underwrite loans based on traffic gives it an advantage over traditional lenders who move slower."¹ Community forum reports from Square sellers confirm the rollout: repeat borrowers note new offers appearing at 50-60% payoff of their prior loan, though some report amounts 30% smaller than last year as the model sizes loans conservatively against current sales.⁴

Loan amounts range from $100 to $350,000, with daily eligibility reviews based on processing volume, payment frequency, account history, and outstanding balances.⁵

This lending expansion is part of a broader AI-driven restructuring at Block. In February 2026, Block cut 40% of its workforce, affecting more than 4,000 employees, while simultaneously boosting its 2026 outlook.²

CEO Jack Dorsey framed the cuts as structural, not distress: "The intelligence tools we are creating, paired with smaller and flatter teams, are enabling a new way of working which fundamentally changes what it means to build and run a company."²

Block's Q4 2025 results back the thesis. Gross profit reached $2.87B, up 24% year-over-year, an acceleration from 18% the prior quarter.⁶ Financial solutions revenue hit $925.5M, up 28%, with Square lending contributing 18% of that growth.¹ Cash App consumer lending originations surged 69% year-over-year.⁶ Block's 2026 guidance targets $12.2B in gross profit with 18% growth.⁷

Square directly competes in the sub-$125K segment that many MCA and revenue-based financing operations consider their core market. The 4M+ U.S. merchants on Square's platform represent a significant pool of borrowers who may never see an MCA offer if Square extends credit first, with zero friction, directly inside the tools they already use to run their business.⁸

Square is not an outlier. Shopify Capital funded $4.7B in merchant advances in 2025. PayPal Working Capital and Toast Capital run the same playbook: own the payment flow, underwrite from it, lend into it. The question for alternative lenders is not whether platform-embedded lending will take market share, but how much and how fast.

Sources
_{1 American Banker | Square Updates AI to Expand and Speed Up Merchant Lending (Mar 27, 2026)
2 deBanked | Square Loans: $7B Funded in 2025, Block Lays Off 40% Due to AI (Feb 27, 2026)
3 Square | Expanding Access to Square Loans (Mar 27, 2026)
4 Square Community | Square Loans 2026 Discussion Thread (Mar 2026)
5 Square Community | Larger Loan Offers Up to $350K (2026)
6 Investing.com | Block Q4 2025: Gross Profit Growth Accelerates to 24% (Feb 27, 2026)
7 TIKR | Block's 40% Headcount Cut Unlocks 54% Profit Growth (Mar 2026)
8 PYMNTS | Square Boosts Lending for Non-Standard Revenue Patterns (Mar 27, 2026)
9 Hoodline | California AG Secures $1.64M From Crossroads Truck Lender (Mar 31, 2026)
10 Pulse2 | Worth Raises $30M for SMB Onboarding and Underwriting (Mar 30, 2026)
11 CalMatters | No More SBA Loans for Non-Citizens in California (Mar 30, 2026)
12 TipRanks | Zest AI Lending Automation at Suncoast Credit Union (Mar 30, 2026)
13 Financial Content | SoFi's $3.6B Strategic Pivot (Mar 30, 2026)
14 CPA Practice Advisor | Square Expands Business Lending Program (Mar 30, 2026)}

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