Square, the e-commerce start-up, announced on Tuesday that it would broaden the scope of its cash advance program through a multimillion-dollar deal with Victory Park Capital, a Chicago-based firm known for backing small-business financing ventures.

The deal will be focused exclusively on expanding Square Capital, which extends short-term cash advances to small and medium-size businesses.

Square would not disclose the terms of the deal. But the company said it had already handed out close to $50 million of its own money in cash advances to more than 10,000 small businesses, and with Victory Park Capital’s additional funds, Square said it would be able to “extend hundreds of millions of dollars to tens of thousands of additional sellers who need capital to grow.”

As part of the program, the start-up monitors merchants who use its credit card transaction system to do regular business. Square then sends out offers of small capital extensions — usually within the $4,000-to-$10,000 range — based on a number of determining factors. Square says this helps some small businesses who may not be able to get traditional loans from banks, as well as those who may be eligible for loans but do not have time for the application process.

The idea, Square says, is for a small business to use the capital as reinvestment for adding inventory, working capital, buying equipment or general business expansion. Customers pay Square back at a fixed cost, anywhere from 4 to 10 percent of the original amount borrowed, which is then deducted from every transaction the business makes until the principal and fee are paid off.

This is a controversial practice, as the technology site Re/code has detailed, since merchants do not have the choice of when to pay back Square.

Square and Victory Park will both give money to businesses that Square selects, and will divvy up the associated capital extension fees upon the merchant’s repayment.

The deal comes as Square broadens its revenue streams in addition to its main business of processing small-business credit card transactions. Along with Square Capital, Square has introduced a subscription-based appointment booking service, as well as an on-demand delivery service for restaurants in recent months.

Square is not alone in the practice. PayPal offers an almost identical program, PayPal Working Capital, which it plans to expand to Britain and Australia later in the year.