Is Square Capital Square’s Lifeline?

Square’s flagship product, that unmistakable credit card reader for small businesses, put the company on the payments map. But since its launch in 2009, the firm has failed to make an impression on the market. Product flops and severed partnerships have led investors to largely lose faith in the company.

Reports this week, however, said that Square’s SME lending operation, Square Capital, is now its fastest-growing unit (besides its payments operations, of course). And with reports that Square is ready to go public, it could mean that even with several high-profile fails, the company’s business-facing services have brought certain, albeit secret, success.

Square Capital On The Move

Reports at Fortune said Wednesday (Aug. 5) that an unnamed source reveals Square Capital is now the firm’s second-fastest growing unit, and is now providing $1 million every single day to small business borrowers. Since Square Capital’s launch less than a year ago, it has reportedly issued more than $225 million in financing to 20,000 businesses.

The company reaches out to potential small business borrowers if they meet Square’s qualifications. As a balance sheet lender, Square provides the funds to a merchant and the borrower repays those funds, plus an additional fee, over time through a percentage of their sales made through Square. Victory Park Capital and Colchis Capital have both signed on as institutional investors for Square Capital, reports said in May, suggesting that investors have confidence in this lending model.

Today, the company is on track to issue $360 million in merchant cash advances this year alone, reports said.

While its small business finance unit may not be as consumer-facing as its Square card swipers, Square Capital seems to be driving volume to a company that is facing its share of doubters.

Separate reports published earlier this month in Fortune brought many of those doubts to light in the wake of news that Square is planning to go pubic. According to what one investment banker told the publication, “I was shocked when I learned they filed. I thought they were struggling.” Previous reports had said Square saw a $100 million loss in 2013, that its margins were shrinking, and that failures with Square Wallet, Square Order and a partnership with Starbucks all but spelled the end for the company.

But an insider contends that that Square’s revenue is doing just fine – in fact, it is expanding up to four times faster than that of PayPal, which has also launched its own small business financing unit. Even with the shuttering of B2C services, Square has launched new, business-facing products, like Square Dashboard, a mobile app that helps SMEs manage their sales data, and Square Payroll.

Of course, it is impossible to know if these are more than rumors or if, in fact, its SMB merchant services strategy is flourishing.

Uncertainties Remain For Square Capital

Despite the rumored success, reports note that still-private Square has yet to release exact figures stemming from Square Capital operations. Fortune’s source said that margins are “higher than expected,” suggesting Square Capital’s business model is working.

But the future of Square Capital is even less certain, reports said, considering those reported IPO plans. Analysts note that the massive IPOs of other alternative lenders, like Lending Club and OnDeck, have failed to impress the market since their debut. It is unclear whether Square Capital’s lending model will assure investors that its business is more reliable than other rivals, or whether investors have given up on the alternative lending market altogether.

Most recent estimations have valued Square at $6 billion. If reports are true and Square hits the public market sometime soon, investors and market players will be keen to get the facts of its Square Capital operations, and whether its B2B services are proving the doubters wrong.