Square Capital, officially announced today, is a new program that grants small businesses an influx of cash to get things off and running. “The biggest blocker for any seller is access to capital,” Dorsey said in an interview on Good Morning America. “It doesn’t matter how big or how small you are.”

It doesn’t work like a traditional bank loan, however. Square, one of our Most Innovative Companies, handpicks the businesses it wants to work with, and offers them cash in advance–kind of like a small-business scholarship.

Here’s how the program works. Let’s say Square Capital offers a new coffee shop a $5,000 advance, and asks for an additional $1,000 in return. The coffee shop would have to pay back a total of $6,000. The catch is that instead of paying that sum back in monthly installments, a small percentage would be paid back to Square every time a customer is rung up on Square Register. “[The infusion] is paid back just by swiping your customer’s credit card,” said Dorsey.

Unlike a traditional loan, the program, which is still in its pilot phase in San Francisco and New York, is designed for flexibility: When business is good, businesses can pay back the sum faster. When foot traffic is a bit slower, the process is still manageable.

Square also confirmed earlier reports that the payment startup is still losing money as it looks to expand its reach. Most recently, Square pulled the curtains off Square Order in May, a new food-ordering mobile app that lets you place orders ahead of time.