Small business lending is changing fast, and if you’re in the game—whether as a lender, broker, or fintech provider—you need to understand where things are headed. On Fintech Takes, Alex Johnson, in his recent deep dive, argues that embedded lending isn’t just a trend; it’s the future of how small businesses will access capital mainly.
But what does that mean?
More importantly, what should you be doing about it?
Let’s break it down.
What is Embedded Lending?
Embedded lending is exactly what it sounds like—lending that’s built directly into the platforms businesses already use. Instead of going to a bank or an alternative lender, a business owner gets financing right where they manage their day-to-day operations.
Think about QuickBooks offering working capital loans based on a business’s financial data or Shopify extending credit to e-commerce sellers based on their sales history. The loan is there, right when and where they need it, without them having to go looking for it.
And that’s the key: business owners don’t want to shop for loans. They just want to solve cash flow problems, buy inventory, or invest in growth—without jumping through hoops. Embedded lending makes that possible.
Why This Shift is Inevitable
Johnson makes a compelling case that financial services have always followed the same pattern:
New channels emerge – Whether it’s retail stores in the past or digital platforms today, new ways to distribute products and services always shake up industries.
Financial products get embedded – Credit cards, insurance, and loans inevitably get woven into these new channels to make transactions smoother.
It becomes the norm – What starts as an innovation eventually becomes the default way of doing business.
We’ve seen this before. In the 1980s, retailers launched store-branded credit cards. In the early 2000s, auto dealers stopped doing their own lending and instead connected customers to a network of lenders. Today, e-commerce platforms integrate "Buy Now, Pay Later" options right at checkout.
The same thing is happening in small business lending. The days of business owners hunting for financing will soon feel outdated—just like writing checks to pay bills does today.
Johnson doesn't mention a few others like Lendio, Pipe, and Rapid Finance who have built their own software platforms to offer embedded lending through other financial institutions or vertical industries. These are other examples that people should take note of.
What This Means for Small Business Lending & MCA Providers
If you’re in the lending space, this shift to embedded finance presents both opportunities and challenges.
🔹 Access to Borrowers is Changing – Small business owners are gravitating toward platforms they already trust for their financial needs. If you’re a lender, you need to be thinking about partnerships with these platforms, not just running ads hoping businesses will come to you.
🔹 Convenience is King – The businesses that thrive in this new era will be the ones that make getting capital seamless. Lengthy applications, excessive paperwork, and outdated underwriting models will put you at a disadvantage.
🔹 One Size Doesn’t Fit All – Not every small business is the same. A solo entrepreneur using Square has different financing needs than a 50-person manufacturing company. Embedded lending works best when it’s customized to the borrower’s needs—not a generic “click here for a loan” approach.
🔹 Risk Assessment is Evolving – The good news? Embedded lending means access to richer, real-time data from business platforms. Instead of relying solely on credit scores, lenders can analyze transaction history, revenue trends, and even customer retention metrics to make better lending decisions.
The Future of Small Business Lending is Closer Than You Think
If you’re still thinking about lending traditionally: advertising to business owners, hoping they fill out an application, and then taking days to underwrite, you might get left behind.
Embedded finance isn’t just an interesting trend; it’s a fundamental shift in how small businesses get capital. The big players like Intuit, Shopify, and Square are already leading the charge. The question is: Are you positioning yourself to be part of this shift, or are you going to play catch-up later?
Now’s the time to explore partnerships, rethink your lending approach, and embrace the embedded model before it becomes the default way businesses borrow.
Because like it or not, that future is already here.
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