Square Underwriting FAQ

Why does Square underwrite?

Due to the nature of Square being a card processing company, we sometimes need to learn more about the businesses we support, including a thorough understanding of the financial history, strength of the business and potential credit risk of the business. This is part of our overall efforts to maintain a safe and secure card processing environment. Based on how much money you process and how you operate your business, your business may fall into a category that requires underwriting. When this is the case, your application will be assessed by one of our underwriters. 

What is credit risk?

In processing payments, Square takes on credit risk because we pay and settle money with your business immediately, even if goods and services haven’t yet been delivered, essentially providing you early access to future sales revenue. 

If the goods and services aren’t delivered or are not delivered as promised, your customers may file a chargeback with their bank. We call the amount of non-delivered goods and services ‘presale exposure’ and the number of days of early revenue access ‘presale days’. When a business is unable to deliver, the presale exposure turns into chargebacks. If the seller is then unable to cover chargebacks associated with the presale exposure, they turn into loss.

Learn more in chargeback.

What can I expect during this process? 

Our underwriters are looking for information like:

  • Your business model

  • How you bill your customers

  • Which Square products you use

  • Your processing history with Square

  • Financial stability of your business

We’ll probably ask for documents like:

Financial statements:

  • Two or more years of fiscal year-end audited financial statements including balance sheets, profit and loss, and cash flow statements 

  • Company-prepared year-to-date financial statements including balance sheets, profit and loss, and cash flow statements 

  • Deferred revenue report and/or booking report

Bank statements:

  • Last three months of business bank statements for the account linked to Square, as well as any additional bank statements demonstrating capitalization

Reviewing financial information such as bank statements and financial statements helps us better understand your business, including cash inflows and outflows, and the ability to support any payment chargebacks should they arise. We want to make sure your business is best protected and that there is adequate capital and cash flow should anything go wrong. 

What if I don’t have the information requested? 

Providing complete and accurate information in a timely manner helps ensure there are no unforeseen delays or unexpected risk mitigation that could impact your business. If you’re having trouble providing the requested information, contact us right away to discuss alternative information you can provide.

What happens at the end of the underwriting process?

At the end of the underwriting process, Square may take different actions based on the level of risk of your business. For most businesses, you will be able to continue processing payments as normal. 

For businesses that have a higher risk, Square may place one of these actions below on your account:


Reserves are a common industry practice used by payment processors and other financial institutions to ensure that merchants are able to cover chargebacks from their buyers. Square uses what’s known as a ‘rolling reserve’, in which card payments subject to a reserve have a percentage set aside and released on a rolling basis. These funds still belong to you and are only used if you are unable to cover a chargeback. If no chargebacks occur, you receive the full amount.

Learn more in our Reserves FAQ.

Payment limit

Payment limits are restrictions that put a temporary cap on your ability to process transactions through your Square account. Square doesn’t put limits on your payments because you’ve done anything wrong. In certain situations, we put limits in place to protect your account and the larger Square ecosystem from transactions that seem likely to result in payment disputes.

Learn more in our Payment Limits FAQ

Will there be future underwriting?

Square also conducts periodic account reviews of your business to ensure it is in good health as it evolves over time. The review frequency ranges from between once a year to once a month, based on internal criteria. Reviews are a common practice in the financial services industry. The information collected during this process is used to confirm that Square has an accurate, up-to-date assessment of your business and helps Square protect all the users on our platform, as well as their customers.

How will Square handle my data securely and safely?

Square is committed to keeping all of your information safe, secure and private. The information provided is reviewed solely by the Accounts team and is only used for the purpose of our review.

For more information, refer to our Security features and Privacy Policy.

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