Nearly Three-Quarters of Small Businesses Using Embedded Lending Access Bigger Credit Lines

Small and medium-sized businesses (SMBs) face challenges when securing credit, especially in an uncertain economy. Embedded lending, which integrates credit options directly into purchase platforms, offers a fast and convenient solution.

But a key element of embedded lending is the need for SMBs to share their financial data in real time — something many businesses are reluctant to do. A PYMNTS Intelligence report, “How Data Sharing Boosts Credit Solutions for SMBs,” reveals when businesses agree to share their data, they not only receive more tailored credit options, but also borrow more and experience higher satisfaction from the lending process.

Real-time access to financial data is critical for lenders to offer customized embedded lending solutions. This access helps lenders assess a business’s cash flow stability and creditworthiness, mitigating risk. According to the report, 100% of lenders in the U.S., U.K., and Australia find real-time data crucial for offering embedded lending options.

In the U.S., 93% of lenders have access to this data most or all the time, allowing faster credit assessments and more efficient lending processes. This seamless flow of data enables quicker, more accurate decisions, benefiting both businesses and lenders.

Despite the advantages for lenders, many SMBs hesitate to share their financial data, citing concerns about data privacy and misuse. In Japan, only 13% of small businesses feel comfortable sharing real-time data, compared to 71% in India, the report notes. Businesses with previous experience in embedded lending are more likely to share data, with 73% of all small businesses surveyed that have used it expressing comfort with doing so again.

Conversely, microbusinesses, which often have fewer credit options, tend to be more dissatisfied with their current lending tools and are thus more reluctant to share data. Their concerns may stem from a lack of understanding or trust in how lenders will use the data, posing a potential challenge for lenders trying to expand their customer base.

Businesses that share their financial data are typically more satisfied with their credit options and borrow more. According to the report, 72% of businesses using embedded lending are very satisfied, compared to only 57% of those using traditional credit. These businesses also borrow, on average, $235,000 — 48% more than those relying on other types of credit. Additionally, 69% of businesses using embedded lending are very likely to switch to a provider offering it, compared to just 38% of those using traditional credit. This suggests that embedded lending not only meets the immediate financial needs of SMBs but also builds loyalty and satisfaction.

By offering faster, more flexible solutions, embedded lending provides advantages for both SMBs and lenders. Businesses that embrace real-time data sharing gain access to larger loan amounts and greater satisfaction with their credit options. For lenders, overcoming reluctance to share financial data is crucial, and by addressing privacy concerns and clearly communicating the benefits, they can increase adoption of embedded lending solutions. This approach can drive business growth, strengthen relationships, improve borrower satisfaction, and create long-term loyalty in the SMB market.

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