Square Updates AI to Expand and Speed up Merchant Lending

Why It Matters

Leveraging real‑time transaction data lets Square rapidly fund underserved small businesses, sharpening its edge over traditional banks and bolstering Block’s revenue diversification.

Key Takeaways

• Square expands AI underwriting to seasonal, new merchants
• Loans approved after first transaction data
• 30‑120 day terms replace traditional nine‑month loans
• Opens credit to over 250,000 merchants

Pulse Analysis

Square’s latest AI‑driven underwriting upgrade underscores a broader industry shift toward data‑centric credit decisions. By mining the first point‑of‑sale transaction, the model generates a predictive revenue profile in seconds, a capability most legacy lenders lack. This real‑time insight reduces reliance on static credit scores and enables Block to price risk more precisely, reinforcing its reputation as a fintech pioneer that can scale credit at speed.

For seasonal and newly onboarded merchants, the ability to secure a loan after a single sale removes a historic barrier to growth. Shorter 30‑ to 120‑day terms align financing with cash‑flow cycles, mitigating default risk that traditionally deters banks from serving volatile businesses. The monthly amortization structure further simplifies repayment, making Square’s offering attractive compared with the longer, often inflexible terms of conventional small‑business loans.

Financially, the underwriting expansion is poised to drive substantive top‑line growth. Square‑related financial services already accounted for 18% of Block’s $925 million revenue increase in 2025, and the anticipated 250,000 new borrowers could amplify loan‑origination fees and secondary‑market sales. As the Federal Deposit Insurance Corp. approval broadens Cash App’s consumer‑lending footprint, Block’s cross‑sell opportunities multiply, positioning the company to capture a larger slice of the $1.5 trillion U.S. small‑business lending market. Continued innovation in AI underwriting will be critical to sustaining this momentum.