Whoever can find more borrowers at the edges gets plenty of short term profitable business, but we all know how it ends...
This new entrant can now offer loans to the higher quality borrowers at a better rate. That makes it easier for sound businesses to borrow cheaply. The new entrant can also discriminate against riskier borrowers with a higher rate. That protects capital and makes the system sturdier.
Adding information, the way Square seems to be doing, to a financial process is sound economics. This is not the stuff of gimmicks.
More critically, their data may have limited power for predicting businesses' creditworthiness. MasterCard can only see MasterCard transactions. This is fine for evaluating the cardholder, particularly if MasterCard is at the top of their wallet. But it produces a conditional view if one wants to estimate a merchant's cash flows. Square, on the other hand, sees a broader swath of a business's transactions. This might give it a small statistical edge in certain cases.
billion dollar companies?
Also, long term profitable business. See: Capital One. Yes, they lend for individuals, not businesses, but the majority of their card customers are on the low-end of the spectrum.
Here's an old (2012) article with context: http://www.nytimes.com/2012/04/11/business/lenders-returning...