How embedded lending and cashflow data unlock SMB capital

In 2025, the total SMB lending market reached $1.4 trillion, and Shopify, PayPal, and Square originated a combined $6.7 billion of those loans. While platform lending accounts for less than 0.5% of the total market, those numbers have grown significantly in the past year. 

Much of that shift comes down to how capital is delivered—platforms (e.g., Shopify, PayPal) and marketplaces (e.g., Etsy, Amazon) can offer it directly within the tools SMBs already use to run their businesses. Real-time cash flow information embedded in these platforms allows companies to make more informed lending decisions. But that visibility is incomplete because platforms only see the data within their own system. Gaining access to financial data outside the platform—in other bank accounts or external sales channels—is critical to this expanding lending market. 

This article explores why SMBs are changing how they borrow money, why this shift is so important for platforms and marketplaces, and how your organization can build and scale embedded lending with the right data partner.

Why SMBs are moving away from traditional lenders and toward embedded lending  

Traditional lenders rely on static snapshots of an SMB’s financial health, such as tax returns, bank statements, and credit bureau data. This backward-looking model works well enough when business activity is fairly stable and predictable. But it breaks down when revenue changes frequently or is fragmented across channels.

Consider the difference between a neighborhood grocery store and an online handbag brand. A grocery store typically generates steady, predictable revenue each month. While there may be seasonal bumps, those are typically the same year over year, making it relatively straightforward to assess repayment ability using historical financial statements. 

A handbag brand, however, might see significant spikes in performance tied to new product drops, seasonal demand, or campaign-driven sales cycles. A single snapshot—like last month’s bank statement—can miss both the volatility and the underlying growth of the business.

For today’s SMBs, this gap creates friction in the lending process and, in some cases, less favorable terms. Businesses may need to provide additional documentation, extend their financial history, or risk being denied altogether. The mismatch between traditional lending processes and how businesses are run today is increasingly shaping how SMBs get loans. 

According to a recent study, 90% of SMBs say embedded financial services are essential to their daily operations, and 65% are willing to switch software providers that fail to deliver them. The embedded B2B finance market is projected to grow to $15.6 trillion by 2030, signaling a continued shift towards integrated financial services. As this shift continues, platforms that want to stay competitive need to rethink how they serve their customers. 

Why embedded lending matters for platforms 

Consider a typical SMB seller on a marketplace platform. They already rely on the platform to process payments, manage orders, and track revenue. 

Over time, the platform gains a complete view of their business performance. If the platform can lend capital based on that view, it extends its role from service provider to financial partner.

Here’s why that shift matters for platforms: 

Expanded revenue with no (or low) acquisition costs

Rather than acquiring new customers or expanding into adjacent markets, embedded lending allows platforms to create a new revenue stream by delivering more value to the customers they already serve. When they work with infrastructure partners, platforms can generate this revenue without taking on direct credit risk or holding loans on their balance sheet.

Stronger retention

When SMBs can access capital within the same environment they use to manage sales, inventory, and payments, the platform becomes more embedded in daily operations, which is directly connected to customer retention. According to a November 2025 report, 64% of marketplaces report lower customer churn from embedded finance tools, and 51% see new revenue streams. 

Better risk management

The success of a lending program depends on how well risk is understood. Cash flow data, which platforms already have access to, enables accurate risk pricing, allowing businesses to approve more qualified sellers while limiting fraud risk. But platform data alone isn’t enough. Scaling embedded lending introduces a new set of challenges that platforms need to solve.

Key challenges of embedding lending  

Despite the clear advantages, building and scaling an embedded lending program introduces both operational and regulatory challenges. For platforms, a successful launch requires addressing these hurdles: 

Regulatory and compliance

Lending introduces a layer of regulatory responsibility that most platforms aren’t currently positioned to manage. Requirements around FCRA compliance, lending licenses, and state-by-state regulations can be difficult to navigate. For many platforms, this is the most immediate barrier to entry. 

Building seller trust

Embedded lending only works if sellers are willing to share their financial data. SMBs are increasingly comfortable connecting financial accounts, but they expect clarity on how their data is used and protected. Clear consent and a familiar connection flow can help reduce hesitation when sharing financial data.

Incomplete financial data

Even platforms with strong internal data only see part of the picture. Platform-native signals—orders, payouts, and transactions—do not capture a seller’s full financial profile across other sales channels, bank accounts, or revenue streams. Without that broader context, platforms can’t make fully informed lending decisions.  

Solving these challenges requires the right partner that can support underwriting, onboarding, and risk management in real time.

How Plaid helps platforms power faster, safer embedded lending 

Embedded lending programs need more than platform data—they need a complete, real-time view of merchant financial health to accurately approve loans and manage risk at scale. That’s the role Plaid plays.

Here’s how Plaid supports embedded lending: 

• Smarter underwriting: Platform data alone doesn’t show a business’s full financial picture. Plaid extends this with real-time cash flow data—balances, income, spending, and up to 24 months of transaction history—to provide a more complete view of repayment capacity.

• Underwriting the personal guarantor: Platform capital programs may require a personal guarantee from the business owner, making the individual's creditworthiness part of the lending decision. Plaid's income and underwriting solution assesses the guarantor's ability to pay with real-time cash flow data, income patterns, and network insights — signals that go beyond credit bureau data alone.

Together, these capabilities help platforms reduce risk, increase capital loan approvals, and scale embedded lending.

Embedded lending unlocked

Embedded lending is becoming a core differentiator for platforms—not just because it is a new opportunity, but because it aligns with SMB expectations. As SMBs shift toward real-time access to capital, platforms that rely on incomplete financial data will struggle to underwrite accurately and scale responsibly. 

The winners will be those who can combine internal data with a complete view of cash flow across accounts. That requires infrastructure that connects onboarding, underwriting, and fraud monitoring to real-time financial data.

Plaid provides that foundation—helping platforms build embedded lending programs that are faster to launch, lower risk, and based on more complete data. Learn more.