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Key takeaways
- Embedded lending lets merchants access financing inside the platforms they already use
- Real-time transaction data makes approvals faster and repayment more flexible than traditional bank lending
- It can be a useful funding option, but merchants should watch for overborrowing and platform dependency
Getting a business loan from a bank used to be a merchant’s worst nightmare: gather three years of financial statements, write a business plan, wait three to six weeks, and if you’re lucky, get approved. If you aren’t, start all over again.
Embedded lending skips this process entirely. Financing is delivered directly to a merchant inside the software platform they're already using to run their business. An offer appears in their dashboard, they fill out a quick application, and the decision is based on their transaction data. If approved, funds arrive, and repayments happen automatically as a percentage of sales.
This guide covers how embedded lending works, who benefits, and what the fine print looks like (because who’s actually reading it these days).
What is embedded lending?
Embedded lending is the integration of credit products like loans, merchant cash advances, lines of credit, and Buy Now Pay Later directly into non-financial software platforms. In practice, this allows a merchant to access financing through a tool it already uses, like a payment processor, a POS system, an e-commerce platform, or accounting software, rather than hitting the bank.
Embedded lending is a category of embedded finance, which covers financial products built into non-financial experiences. However, embedded lending specifically covers the credit layer.
How embedded lending works
Three parties are involved in most embedded lending arrangements:
- The Platform: Provides the customer interface and transaction data that enables fast underwriting and issuance of funds.
- The Licensed Lender: Provides the capital and handles the credit risk, usually a bank or fintech company integrated behind the scenes.
- The Merchant or Borrower: Applies for and receives financing through a platform they’re already using
A bank reviewing a loan application normally works from dated financial statements. But a platform that's been processing a merchant's payments for 18 months has real-time transaction history, seasonal patterns, payment reliability, and current revenue, all of which provide a much more accurate basis for a credit decision, available instantly. This is why underwriting for embedded lending can happen in minutes instead of weeks, making it an ultra-practical option for merchant financing.
What separates embedded lending from traditional lending is placement. Financing appears in context, for example, when a merchant is reviewing their cash flow, managing inventory, or processing orders, rather than sitting behind a separate application on a banking platform they rarely open.
From a merchant's perspective, the embedded lending process typically looks like this:
A financing offer appears in the platform dashboard. Sometimes it’s even pre-approved, speeding up the process even more.
The merchant applies directly within the platform, which only takes a few minutes
A credit decision comes back based on live transaction data made available through the platform
Funds are deposited, typically within one to two business days
Repayment happens automatically as a percentage of daily sales. Because it’s adjusted with cash flow, it's pretty simple for merchants to stay on top of the loan.
In most cases, no collateral is required, there’s no separate account to open, and best of all, there’s no need to compile a mountain of documentation to secure funds.
Embedded lending use cases
Embedded lending works across a wide range of industries and merchant types. This model essentially works wherever a platform has enough transaction data to underwrite a credit decision. Here are some popular embedded lending use cases:
Retail – A fashion retailer might see a pre-approved financing offer before the holiday season. This can be used to fund an inventory order directly through their payments dashboard, and then the loan can be repaid from seasonal sales as they come in.
Hospitality – A hotel group using a Property Management System (PMS) may need to renovate a block of rooms before peak season. The PMS processes all bookings and revenue, providing enough data to underwrite a loan based on future bookings and past performance. Funds arrive in days, and the renovation is finished in time, allowing the merchant to charge a premium for refurbished rooms while repaying the loan.
Travel – An OTA or tour operator using a booking platform can offer customers instalment payments or loans at checkout, spreading the cost of a trip over several months without routing them through a separate loan application or credit card process. The financing provider pays the merchant upfront, which allows the customer to pay over time. Trips that would have been deferred due to cost are actually booked, average transaction values increase, and the merchant collects full payment at the time of booking rather than waiting for the customer’s budget to catch up.
Restaurants – If a franchise needs to replace its equipment across multiple locations, its POS has two years of daily transaction data and may display a working capital offer directly inside the dashboard. This loan is calculated based on what the business can realistically repay based on daily card sales, eliminating the need to hit the bank to procure equipment funds.
B2B wholesale – A supplier who sells through a B2B marketplace can offer net 60 payment terms to buyers directly embedded into checkout. The platform underwrites terms based on the buyer’s order history and payment record, ultimately replacing a credit check with data that’s already there.
Real examples of embedded lending
The most useful way to understand how embedded lending works is to look at where it's already operating at scale.
- Shopify Capital – Shopify uses its merchants' transaction data to pre-approve them for cash advances and business loans. Pre-approved merchants see what financing they're eligible for, accept, and receive financing without filling out an application, completely revolutionising small business funding. Shopify Capital originated $3 billion in merchant funding in 2024, growing to $4.2 billion in 2025.
- Amazon Lending – Amazon has offered loans to its marketplace sellers since 2011, using seller data like order history, sales volume, customer ratings, and return rates to inform lending decisions. Sellers don't need to go hunting for financing since eligible merchants receive pre-approved offers directly in their seller portal. The platform these merchants use to run their business is also the one assessing whether they qualify for capital.
QuickBooks Capital – Intuit built financing directly into its accounting software. Businesses using QuickBooks for their bookkeeping can access credit based on the financial data already in the platform. There’s no need for merchants to compile the typical documentation required for a loan application.
What these embedded lending examples have in common is that the financing is powered by payment data. Each merchant platform already has a complete picture of how sellers are performing, making it simple to create fast, accurate credit decisions based on readily available data. The best way to think about it is the payment layer is the foundation that the lending product is ultimately built on.
Why embedded lending is growing
Traditional small business loans have a structural issue. Bank approval rates for SMBs are low, and the application process is slow, mainly because the documentation burden is so significant. This gives embedded lending plenty of room to fill the gaps left by the classic banking system, while reducing the merchant’s strain related to loan access.
The numbers back this up, especially as merchants have found a more practical way to fund their businesses:
- Shopify Capital grew 40% from 2024 to 2025
- Klarna expects to facilitate $6.5 billion in loans over the two-year term of its U.S. Fair Financing agreement.
- QuickBooks Capital doled out $1.3 billion in small business loans in a single fiscal quarter ending October 2025, double from the same quarter the prior year
We can attribute this growth to a few things:
- Open banking and API infrastructure have advanced enough to support real-time data sharing
- Platforms have figured out how to leverage lending as a real revenue stream, not just a simple feature
- Demand from SMBs for financing hasn’t changed. In fact, as the embedded finance space evolves, it’s more common for them to expect faster, lower-friction access to loans
The products are also more sophisticated than they were a few years ago. Early embedded lending was fairly simple, with standard cash advances. But now, products use real-time transaction data and offer repayment terms that track how a business actually performs, versus blind projections.
Benefits of embedded lending for merchants
It’s clear there are several far reaching benefits of embedded lending on the merchant side, including:
Speed – Instead of waiting months to hear back from a loan application, embedded lending decisions come back in minutes. For a business that needs capital to cover a cash flow gap or support itself before a peak season, the waiting game of traditional bank loans just isn’t an option anymore.
Accessibility – More businesses qualify for embedded lending versus traditional bank loans, even those with a limited credit history, who still have strong transaction records. A merchant with a strong track record of processing payments through their platform can be assessed as such, even if these metrics don’t show up in a classic credit report.
Convenience – Embedded lending doesn’t require any new accounts, in person visits, or additional documentation. The data the lender needs exists entirely in the platform, creating a frictionless experience for the merchant. The offer also tends to appear when the business is already thinking about financing; they don’t need to hunt down the offer themselves.
Flexible repayment – In many cases, embedded lending comes with flexible repayment terms tied to business revenue. So in busy months, more gets repaid, while in slower ones, less does. For seasonal businesses, this can make a huge difference.
Benefits of embedded lending for platforms
Beyond just the businesses that benefit from embedded lending, this financial model has also created a strong commercial case for the platforms that offer it. These include:
New revenue stream – Embedded lending comes with things like origin fees or even revenue sharing agreements in some cases, creating a strong new revenue stream for platforms beyond their core offerings.
Merchant retention – If a merchant receives financing through a platform, it’s much more difficult for them to move off of it.
Reinvestment – When a platform lends capital, merchants often reinvest the funds back into the platform. For example, Shopify sellers who receive loans from the platform often use it for ads and inventory, meaning the platform benefits directly from what the loan is funding.
Key considerations for merchants thinking about embedded lending
Embedded lending sounds like a dream scenario for most merchants, but it’s important to understand the considerations that come with borrowing money from a platform.
Risk of overborrowing – Quick, easy access to capital makes it easy to take on more debt than your business actually needs. Before accepting an offer, it’s paramount to know what the loan is for and whether the repayment terms fit your actual cash flow.
Capital access is tied to the platform – In most cases of embedded finance, the loan is linked to the platform that provides it, so switching platforms could mean losing access to capital. This is especially worth remembering if the lending product is a regular part of your business operations.
Transactions define credit – Because embedded lending is so data driven, your behavior on the platform as a merchant is what shapes your credit profile. This is done through sales patterns, refund rates, payment consistency, and more. Understanding what data is being assessed, who has access to it, and how it’s being used is a huge consideration.
Less competition – A huge downside to embedded lending is one lender means one rate. When the platform is the only lender in the room, there’s no competition when it comes to price. There’s convenience, sure, but it’s harder to get a real grasp on the effective cost of the capital and how it compares to alternative lenders.
Keeping all of this in mind when considering embedded lending will help you make a well informed decision as a business owner.
Is embedded lending the right solution for your business?
Not every business or every situation is a good match for embedded lending.
Embedded lending might be right for merchants who are:
- Already processing a significant transaction volume on a platform that offers financing
- In need of short term capital for a specific purpose, like inventory, marketing efforts, or covering a gap in cash flow
- Struggling with traditional lending timelines and approvals
- Making consistent revenue on the platform to support data backed underwriting
Embedded is less well suited in instances when:
- You’re funding a long term investment. Embedded lending is best for short to medium term projects as opposed to multi-year capital
- Your transaction history on the platform is new or inconsistent. Merchants with thin data have less competitive terms and weaker underwriting
- You haven’t compared what the platform is offering against what’s available elsewhere
The bottom line
Embedded lending is a really great example of how the financial services industry is shifting. Financial products are infinitely more useful when they’re built into the tools businesses already use, based on live data, and readily available in the right contexts.
For merchants, embedded lending means faster access to capital with fewer hoops to jump through. On the platform side, it means stronger merchant relationships and a new revenue stream.
Planet sits at the payment layer that all of this runs on. The transaction data that makes embedded lending fast and accurate starts with the infrastructure processing payments in the first place. If you want to understand how your payment stack fits into the embedded finance picture and what it means for your business, learn more about Planet payments here.
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