The Green Sheet Online Edition
October 27, 2025 • 25:10:02
Embedded finance: How platforms are redefining small business funding
By 2030, embedded lending is estimated to have a valuation of $7.2 trillion. Much of this lending will be taken up by small businesses, companies that often find it notoriously difficult to access funding at the point it is required. This can cost businesses potential customers, limiting opportunities for growth.
In this article, I'll discuss what embedded finance is and the way it will help to redefine small business funding.
What is embedded finance?
Embedded finance (sometimes known as embedded lending) is financing offered directly through solutions that a business may already be using. For example, a payment processor, a particular marketplace, etc. There are also dedicated platforms offering embedded financing, but the two examples just mentioned would be the main ones.
Rather than head to a bank and use the more traditional financing options available to small businesses (and those options have downsides), businesses will instead use the embedded lending tools integrated into the software they use to borrow money quickly.
How embedded finance is redefining small business funding
Small businesses, particularly those going through a period of rapid growth, often have limited cash available. This can pose two problems: growth becomes harder, and a business may not have the cash needed to replenish stock, which means it becomes tougher to service existing customers.
Now, a small business can often head to a bank and borrow money. However, this entails an incredibly slow process. Small businesses will often need to wait days, if not weeks, for a decision. Banks are quite strict about who they lend to as well. This means a small business that may be generating profit may not meet the bank’s criteria, and its loan application will be denied. The business will then be on the path to failure.
Embedded finance is distinctly different
The embedded finance process is quicker. In fact, many of the solutions available can provide an almost instantaneous lending decision, providing funding when a business needs it. There will also be few forms to fill in.
Many embedded financing solutions are integrated in payment processors and marketplaces (for example, Shopify), and those providers will have a detailed record of the income of a business, how frequently it makes sales, whether it can keep up with repayment obligations, and more. This means there is a chance the provider will approve lending that more traditional providers wouldn’t approve.
Embedded lending is helping businesses grow
Embedded lending can also provide important cash flow when a business may be suffering from a slight downturn (for example, if a business deals with seasonal sales). This helps to improve a businesses’ customer journey, since it will have access to the funding it needs to keep stock replenished, have the cash needed for marketing, and more.
Also, businesses with regular access to financing tend to grow more rapidly, attract more customers and more easily maintain a healthy cash flow. I won’t be surprised if most small businesses end up leaning on embedded finance in the future.
We are in the early stages of embedded finance. The market is very much in the ‘growth’ stage, but it is rapid growth. Small businesses are reaping the benefits of embedded finance, as are their customers. This will continue long into the future. I anticipate an increasing number of platforms will start to offer embedded financing options as a way to ensure that the businesses they work with stay in business.
Note: The following resources were consulted in researching this article:
pipe.com/resources/articles/exploring-the-benefits-of-embedded-lending
Chad Otar is CEO of Lending Valley Inc. For information about the company, please visit www.lendingvalley.com. To reach Chad, send an email to chad@lendingvalley.com.
Notice to readers: These are archived articles. Contact information, links and other details may be out of date. We regret any inconvenience.
