Introduction
Accounting software resides on the most decision-relevant data set a small business has: invoices, receivables, payables, payroll, and cash flow. Embedding lending means using this data to offer credit through the accounting software businesses already use. For platform companies designing a 2026 roadmap, the question is which lending solution aligns with a platform’s data capabilities and customer requirements.This guide will provide an overview of the different lending solutions available and how to compare them.
The scale of MSME financing needs has been documented in multiple industry studies. Embedded lending is one response to that gap, because it replaces manual document collection with data the platform already holds.
What Embedded Lending Means Inside Accounting Software
Embedded lending refers to a financial capability delivered via a non-finance platform, wherein the lending transaction – including the lending, disbursal, and repayment processes – is conducted within the platform itself. Note that the accounting platform does not act as the financier, because in most cases an authorized financial institution will supply the capital, while the software provides customer relationship management and information.
Three characteristics commonly used to distinguish embedded lending from referral models include:
- There is no leaving the platform for the client. The application, underwriting, and repayment transactions are completed within the screens of the accounting software
- The underwriting process relies on platform information. Invoice age, revenue trends, and payment behavior substitute for or complement paperwork
- Repayment depends on the activity of the company
Option One: Revenue-Based Financing Built on Ledger Data
Revenue-based financing involves providing funding against the company’s future income, with repayments made as a percentage of monthly income up to an established repayment cap.
- Data it needs: revenue data consistently reported in the general ledger or invoicing tool or payment processor linked
- Suitable for companies that have: recurring/recurring style revenue, marketplace sales, and stable month-over-month revenue
- Reason for consideration by platforms: repayment is flexible and hence can be used for companies with seasonal variations in performance
- Consideration in evaluation: how the revenue sharing percentage and repayment cap are calculated and how the system works in a slow month
Option Two: Invoice and Receivables Financing Linked to AR Data
This method uses cash as security against outstanding invoices. The ageing report on accounts receivable from the platform serves as the basis for underwriting.
- Data used: dates when the invoices were issued, terms of payment, identity of payers, and past collection experience
- Suitable for companies with: business-to-business clients, long terms of payment, and concentration of receivables
- Reason why platforms may consider this method:the asset for securing financing is obvious in the ledger, so no valuation of assets is needed
- Key issues to examine: financing of all ledgers or certain invoices, treatment of disputes and credit notes, and responsibility for collections
Option Three: Working Capital Advances Tied to Cash Flow Signals
Short-term loan based on the expected and actual cash flows from the platform’s perspective.
- The data it uses: reconciliations from bank feeds, payable schedules, and projections of cash inflows
- Suited for: businesses with a short and predictable operating cycle and an identifiable working capital shortfall
- The reason why platforms offer it: it is easy to describe and addresses a specific and repetitive need
- Key criteria to assess: the cost of the loan stated clearly, the term of repayment, and the possibility of taking out several loans at once
Option Four: Partner-Provided Lending Through a Finance Marketplace
Instead of offering a single product, the platform provides multiple financing options from licensed partners based on the client’s profile.
- Data it uses: a comprehensive business profile based on the accounting file
- Suitable for businesses with: diverse requirements that no single product can fulfill
- Why platforms use it: the scope increases without designing every credit product through the platform itself
- Key factors to consider: selection process for partners, sharing of client data, and regulatory requirements of the platform regarding suitability and disclosure in each jurisdiction
Option Five: Embedded Credit Lines for Recurring Operating Costs
A revolving line of credit whereby a company borrows and repays on an ad hoc basis, typically intended for recurring costs like inventory, salaries, or marketing expenditure.
- Information used: historical trade data and spending patterns from the books
- Appropriate for companies that have recurring funding needs for the short term
- Reason platforms factor it in: recurrence of use and reward for platform engagement
- What to examine: process for assessing the limit, conditions for modification, and treatment of unused credit lines
How to Compare Embedded Lending Options for Your Platform
Neutrality in the comparison process will ensure that the team evaluates each alternative without the need for claims by marketers:
- Compatibility of data. The choice should be based on data that the platform really possesses in depth and in history
- Compatibility of the customers. The option should be suitable for the way in which your MSME customers trade, especially their seasonal aspects
- Regulatory aspects. Identify the countries of operation, confirm who possesses the license, and clarify what responsibilities the platform has
- Disclosure aspects. Cost, repayment, and the total obligation should be disclosed to the client clearly
- Load on the operations of the team. Consider what you handle – onboarding, servicing, dispute handling, collection, and reporting
- Compatibility with consumer protection requirements
Regulatory requirements for embedded finance are still being developed around the world, and the scope of obligations varies depending on the jurisdiction. The development teams of platforms must be aware of how the responsibilities around licensing, disclosure, and data consent are shared between the software vendor and its lending partners, and consult the laws of their jurisdiction before launch.
Data consent is one of the crucial points. Underwriting based on customers’ accounting data typically requires express consent stating which accounting data will be used, for what purposes, and for how long. Designing the flow of obtaining consent at the very beginning helps companies move much faster than companies treating data consent as an afterthought and having to redesign the entire onboarding process later on.
Frequently asked questions
1.Does the accounting platform itself become the lender?
Usually not. In most structures, a licensed financial institution provides the capital and holds the regulatory permissions, while the software platform supplies the customer relationship and the data used for assessment.
2.How much historical data is typically needed?
Requirements vary by provider and product. Revenue-trend-based options generally depend on several months of consistent records, while receivables-based options look at invoice ageing and payment behaviour.
3.Can lending be embedded if customers operate across different countries?
It can, but product availability, licensing, and disclosure rules differ by market. Platforms operating across borders usually need market-specific partner arrangements rather than a single global configuration.
4.What happens if a customer’s revenue drops?
This depends on the structure. Revenue-linked repayment adjusts with performance because payments are calculated as a share of revenue, while fixed-schedule products do not. Either way, the total repayment obligation set out in the agreement does not disappear.
5.Is embedded lending suitable for every accounting platform?
Not automatically. It depends on the depth and consistency of the data the platform holds, the trading profile of its customer base, and whether the platform can meet the compliance and disclosure expectations in each market it serves.
Conclusion
Further considerations for embedded lending include financing structures, repayment mechanisms, regulatory responsibilities, and data governance requirements between software providers and regulated financial institutions.
This article is intended for informational purposes only and does not constitute legal, financial, investment, or other professional advice, nor does it constitute a recommendation of any product or service. This article should not be regarded as constituting an offer or a solicitation to buy or sell any regulated or financial products or services. It has not been reviewed by any regulatory authority in any jurisdiction. Bettr makes no representations or warranties regarding the accuracy, completeness, or applicability of the content, and readers are encouraged to consult with legal, financial, or other professionals for advice tailored to their specific situation. Bettr does not guarantee the accuracy and completeness of this article and expressly disclaims any and all liability to any person in respect of the consequences of anything done or omitted to be done wholly or partly in reliance on this article.
