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In a recent article, Rohit Arora, a Forbes Senior Contributor and CEO of small business financing platform Biz2Credit , discusses the Biden administration's efforts to boost small business lending and offers suggestions for the incoming Trump administration to further improve access to capital for small businesses. The piece highlights recent initiatives by the Biden-Harris administration while proposing additional steps that could be taken to enhance support for entrepreneurs. The piece was likely written before Trump announced the nomination of former Georgia Senator Kelly Loeffler as the new administrator of the Small Business Administration on Dec 4th. Let's see what Mr. Arora says. According to the article, the Biden administration has made significant strides in expanding access to capital for small businesses, particularly among diverse communities. In the past year, the Small Business Administration (SBA) backed a record $56 billion in capital for small businesses. This effort has led to a doubling of business ownership among Black families and new highs for Hispanic, Asian American, and women business owners over the past four years. Key points from the Biden administration's recent announcements include: 1. Increasing the maximum loan amount backed by SBA Community Advantage Small Business Lending Companies from $350,000 to $500,000 for active lenders in good standing. 2. Releasing procurement guidance to improve federal contracting opportunities for small businesses competing for over $700 billion in federal contracts. While these initiatives are positive steps, Arora suggests that the incoming Trump administration could implement additional measures to further support small businesses: 1. Create a small-dollar lending program through the SBA for online lenders, focusing on loans of $100,000 or less. This would better serve small businesses that don't require larger loans and could improve access for women- and minority-owned businesses. 2. Mandate technological upgrades to the SBA lending process, digitizing the infrastructure to reduce the loan application process from 90 days to less than a week. This would expedite capital access for entrepreneurs. These proposals aim to address the urgent needs of the small business sector, which plays a critical role in the U.S. economy. Small businesses account for approximately 70% of all new jobs created since 2019 and employ roughly half of the nation's private-sector workers. However, the sector remains fragile and requires continued support and innovation in lending practices. By implementing these changes early in his administration, Mr. Arora thinks President Trump could potentially accelerate growth in the small business community and position it as a cornerstone of his economic agenda. The focus on streamlining processes and creating more accessible lending options could have a significant impact on the overall small business lending market, potentially leading to increased entrepreneurship and job creation across diverse communities. As the small business landscape continues to evolve, policymakers must adapt and innovate in their approach to supporting entrepreneurs. The suggestions put forth by Mr. Arora represent a forward-thinking strategy that could complement existing initiatives and further strengthen the foundation of America's small business sector.

The New York Attorney General has secured a $1.065 billion judgment against Yellowstone Capital , a business funding company accused of exploitative lending practices. The case represents a landmark effort to protect entrepreneurs from predatory financing schemes. Key Points of the Judgment Debt Forgiveness: Over $534.5 million in debt will be canceled for more than 18,000 small businesses nationwide. Small businesses in New York alone will see $36 million in relief, benefiting over 1,100 merchants. Financial Penalties: Yellowstone Capital and its officers must pay $16.1 million in penalties. An additional $514.3 million in liabilities remains to be addressed. Ongoing Legal Actions: Litigation continues against the company’s successors, Delta Bridge Funding and Cloudfund, as well as its co-founder, David Glass. Uncovering Deceptive Practices Yellowstone Capital was found to have misrepresented their merchant cash advance agreements. Claiming to purchase future revenue streams, the company instead imposed fixed repayment terms. This practice resulted in effective interest rates as high as 820%, far exceeding New York’s legal usury limit of 16%. Wider Implications This judgment is part of a broader initiative to combat unfair lending practices. Similar actions in New Jersey resulted in a $5.6 million settlement and $21.8 million in debt forgiveness last year. Message Sent The outcome of this case underscores the need for vigilance in the small business lending market. Regulators are increasingly focused on holding lenders (funders) accountable for exploitative behavior, ensuring a fairer financial landscape for entrepreneurs. This decision sends a clear message: predatory practices targeting small businesses will not go unchecked.

Welcome to this week's Monday Roundup! As we kick off another exciting week in the world of business lending and fintech, we've got some juicy headlines that are sure to shake things up. Grab your coffee and settle in, because we're diving into two major stories that are making waves across the industry. Let's jump right in! New Sheriff in Town: CFPB Gets an Acting Director In a move that's sure to raise eyebrows and potentially reshape the regulatory landscape, Treasury Secretary Scott Bessent has been tapped to lead the Consumer Financial Protection Bureau (CFPB) as its acting director, as reported by Politico . This appointment comes hot on the heels of President Donald Trump's decision to fire Rohit Chopra, the Biden-era appointee who had been steering the CFPB ship since October 2021. Bessent's appointment is more than just a changing of the guard; it signals a potential shift in the CFPB's approach to regulation and enforcement. The agency, which has long been a thorn in the side of Republicans who view it as overreaching, may be in for a significant overhaul under Bessent's leadership. What does this mean for the fintech and lending industries? Well, buckle up: Regulatory Review: Bessent is expected to lead a comprehensive review of recent rules and enforcement actions implemented by Chopra. This could potentially lead to a rollback of some of the more stringent regulations that have been put in place and lawsuits dropped in certain cases. Trump's Agenda: Bessent expressed his commitment to advancing President Trump's agenda, focusing on lowering costs for Americans and accelerating economic growth. This could translate into a more business-friendly approach to regulation. Uncertain Future: While Bessent will serve as acting director, the search for a permanent CFPB chief is ongoing. The direction of the agency could still change depending on who ultimately takes the helm. Interestingly, Bessent has been rather tight-lipped about his views on the CFPB in the past. In his Senate confirmation hearings for Treasury Secretary, he offered a diplomatic response when asked about the agency's future, stating that he looked forward to working with the incoming director to ensure the Bureau's effectiveness in fulfilling its statutory mission. As the fintech and lending industries navigate this transition, all eyes will be on Bessent and the CFPB. Will we see a dramatic shift in regulatory approach, or will it be business as usual? Only time will tell, but one thing's for sure – this is a story worth watching closely. A Surprising Twist: Trump Backs Fed's Interest Rate Decision In an unexpected turn of events that's got the financial world buzzing, President Donald Trump has thrown his support behind the Federal Reserve's recent decision to hold interest rates steady. This marks a significant departure from Trump's previous stance, where he often criticized the Fed for its monetary policy decisions. The President's endorsement of the Fed's move comes at a crucial time for the economy. With inflation concerns looming and economic indicators sending mixed signals, the Fed's decision to maintain current interest rates reflects a cautious approach to monetary policy. This development has several implications for the fintech and lending industries: Stability in Lending Rates: With interest rates holding steady, lenders can expect a period of stability in their pricing models. This could lead to more predictable loan terms for borrowers in the short term. Continued Economic Growth: The Fed's decision, now backed by the President, aims to support continued economic expansion. This could translate into increased demand for business loans and fintech services as companies look to capitalize on growth opportunities. Potential for Future Cuts: While rates are holding steady for now, the door remains open for potential cuts in the future if economic conditions warrant. The potential tariffs on Mexico, Canada, and China are a major part of this equation. As of this writing, there has been a reported agreed-upon delay of one month on the new tariffs between Mexico and the US. no word on the others. This has settled the markets after beginning the day in turmoil and the Dow down 600 points. The President's support for the Fed's decision also signals a potential thawing in the relationship between the White House and the central bank. This improved cooperation could lead to more coordinated economic policies, potentially benefiting the financial sector as a whole. As we navigate these interesting times, it's clear that the landscape of business lending and fintech continues to evolve. From regulatory shakeups to surprising policy alignments, there's never a dull moment in our industry.

We recently visited the beautiful Viking Funding office in downtown Fort Lauderdale to meet with owners Jake Kelley and Tylor Pemberton . In this video, they shared a ton of great information to help others who want to follow a similar path and better understand who they are and what they stand for when doing business with them. Viking Funding (754) 240-8620 1 E Broward Blvd Suite 925 Fort Lauderdale, FL 33301

A recent article on CNBC highlights the growing problems with the situation at the CFPB, how bankers are reacting, and what will happen if they cease to exist in any meaningful way. In this video, I discuss the article and a conversation I had over the past weekend with a criminal defense attorney about what he sees happening in the next several years if things go how he sees unfolding now.

A recent Reuters article sheds light on the growing underground industry of Fraud-as-a-Service (FaaS) . This term has gained significant attention over the past year. Cybercriminals have turned digital fraud into a structured business model. While fraud itself is nothing new, FaaS has made sophisticated scams accessible. Now, even bad actors with minimal technical expertise can launch large-scale attacks. This trend has serious implications for fintech companies and business lenders . It facilitates an increase in fraudulent applications, identity theft, and financial crimes. These activities can erode trust and profitability within the industry. What is Fraud-as-a-Service? Fraud-as-a-Service functions like a black-market version of Software-as-a-Service (SaaS). In this model, cybercriminals sell pre-packaged tools, training, and customer support to facilitate fraud at scale. Commonly Offered Services Some of the most commonly offered FaaS services include: Phishing Kits : Ready-to-use templates to create fake websites or emails designed to steal sensitive data. Credit Card Fraud Services : Access to stolen card data and techniques to exploit it. Synthetic Identity Fraud Tools : Databases of fake or stolen identities used to create fraudulent applications. Account Takeover Assistance : Techniques that bypass security measures to gain control over user accounts. Business Email Compromise (BEC) Kits : Scripts and automation tools to impersonate executives for fraudulent wire transfers. Money Laundering Networks : Systems that allow criminals to move illicit funds through legitimate businesses. FaaS is particularly dangerous. These services are marketed to non-technical criminals and come complete with customer service, refunds, and even tutorials . This makes executing fraud easier than ever. How Fraud-as-a-Service Impacts Fintech and Business Lending The expansion of FaaS poses significant challenges for fintech companies and business lenders. Fraudsters exploit these tools to target online financial services. Here are some key risks: Increased Fraudulent Applications Business lenders are experiencing a surge in fake or manipulated loan applications. These often use synthetic identities or stolen credentials. Erosion of Customer Trust Fintech platforms rely on user trust. A spike in fraud-related incidents can drive away legitimate borrowers and investors. Regulatory and Compliance Pressures As fraud becomes more sophisticated, regulators may impose stricter compliance and security measures. This increase can raise operational costs for fintech firms dramatically. Financial Losses and Operational Costs Many fintech lenders report millions in losses annually due to fraud-related chargebacks and defaults. The costs of implementing effective fraud prevention tools also continue to rise. How Fintech and Lenders Can Fight Back To counter the growing threat of FaaS, financial institutions and fintech companies must stay ahead of fraud trends and implement proactive defenses . Here are essential strategies: Deploy AI-Powered Fraud Detection Machine learning models can analyze vast amounts of transaction data. They can detect suspicious behavior in real-time. Many companies are already using AI to spot anomalies before fraud occurs. Strengthen Identity Verification Processes Requiring multi-factor authentication (MFA) , biometric verification , and real-time document verification can help prevent synthetic identity fraud. Educate Customers and Employees Businesses must provide training on how to recognize phishing attempts, fake loan applications, and social engineering scams. Knowledge is a powerful defense against cyber threats. Increase Collaboration Between Lenders and Fintechs Sharing fraud intelligence across lending networks, fintech firms, and regulatory bodies can help detect emerging fraud patterns more quickly. Collaboration enhances collective security. Continuously Update Security Protocols Cybercriminals constantly evolve their tactics. Thus, regularly updating fraud detection systems and security policies is critical. Staying informed about the latest threats can make a substantial difference. Final Thoughts The rise of Fraud-as-a-Service represents a serious and evolving threat to fintech companies and business lenders. As highlighted in the Reuters article , fraudsters now operate with greater efficiency. They offer criminal services in an on-demand model, mirroring legitimate tech businesses. While fraud cannot be entirely eliminated, fintech firms and lenders investing in AI-driven fraud detection, strong authentication measures, and industry-wide collaboration will be better positioned. They can effectively protect themselves and their customers from these sophisticated threats. An effective strategy is crucial for maintaining trust and functionality in the financial services landscape. By being prepared, businesses can reduce the risks associated with fraud. For more information on this topic, you can read the full article here .

It's hard to describe whats really happening at the CFPB but news just broke from Reuters that they are dropping the lawsuit against the three major banks for failing to protect consumers from fraud costing hundreds of millions of dollars without more specific details. This is the most recent of cases dropped, and some would call it being pardoned, given the orders from the Trump administration to reduce operations, staff, and functions. We will keep up to date on all things happening at the CFPB but things are certainly unpredictable as of now. A lot of companies are getting away with possible violations and cheering this while others are wondering whos going to hold anyone accountable for actions that affect every consumers and small businesses.

Two new business outlook reports came out this week from OnDeck in combination with Ocrolus and Bluevine who also does a report using a third-party research firm. I'm going to quickly review them and give my first impressions on the data reported by small business owners across the country. Links ARF Financial Webinar Registration Funders Forum + Brokers Expo OnDeck + Ocrolus Small Business Cash Flow Trend Report Bluevine BOSS Report

In the course of the various analyses we perform at NISO, we have noticed a variety of results in the refinancing of MCA deals.  In contrast to asset-backed lending, where the risk-reward tradeoff often relies on collateral value rather than the borrower’s cash flow cycles as MCA does. For funders engaged in Merchant Cash Advance (MCA) transactions, the decision to refinance an existing cash advance by issuing a second one – or many more - can have a significant impact on profitability, cash flow, and overall risk exposure.  While refinancing offers the potential for higher returns through compounding and reinvestment, it also introduces complexity in cash advance management and increased default risk.  Understanding how to measure the performance of these deals and when to apply refinancing strategies is crucial for maximizing returns while safeguarding capital.  The Financial Impact of Refinancing Refinancing an active MCA—particularly when using part of the second cash advance to pay off the first—fundamentally changes the funder’s financial structure since MCA transactions focus on the borrower’s revenue streams and daily or weekly payment structures. 1. Cash Flow Acceleration:  By refinancing, the funder reinvests funds earlier than expected. In MCA transactions, where payments are deducted frequently, refinancing allows continuous reinvestment into higher-yield opportunities, potentially increasing profitability faster. 2. Compounding Returns:  The funder benefits from a high effective return when the second MCA cash advance is structured to generate significant additional revenue. Since MCAs are often structured with fixed factor rates, the yield on refinanced deals can be significantly higher. 3. Increased Risk Exposure:  While refinancing provides new revenue potential, it also extends the borrower’s obligations. In MCA transactions, this could result in overburdening a borrower’s daily cash flow, like a house of cards, if the second deal falters too soon, then the potential benefits of the first and the second deal can collapse. Evaluating the Commercial Viability of Refinancing The decision to refinance an MCA should be based on several key performance metrics and commercial considerations, among others: - Internal Rate of Return (IRR) : Measures the effective annualized return considering the timing of cash flows. When assessing refinancing, IRR should be calculated as a continuous return metric, combining cash flows from the initial advance with those from the renewal. Since part of the second advance may be used to pay off the first, IRR should reflect this reinvestment cycle. Additionally, origination fees that are deducted upfront and repaid later should be accounted for, as they impact the true return profile. - Equivalent Annual Annuity (EAA):  A useful complementary metric, EAA converts cash flows into an equivalent annual payment, making it easier to compare refinancing options across different durations. EAA helps funders evaluate whether renewing an advance is more profitable than issuing a new one, considering capital turnover. - Return on Equity (ROE): A better measure than ROI in MCA transactions, ROE evaluates profitability relative to the funder’s capital base. Since funders frequently reinvest repaid capital into new advances, ROE captures the compounding effect and efficiency of capital deployment more effectively than a simple return metric. - Repayment to Revenue Ratio:  In MCA transactions, analyzing the percentage of daily or weekly revenue used for repayment is crucial. Overleveraging the borrower can lead to unsustainable repayment structures. - Debt Service Coverage Ratio (DSCR):  While traditionally used to evaluate a borrower's ability to meet debt obligations, DSCR is also relevant in MCA transactions to assess the borrower’s revenue strength.  The Role of Funding Structures in Refinancing Decisions Funders often rely on different capital structures, such as Syndicates, loans, or their capital, to finance cash advances. These structures influence how revenue is recognized and the financial hurdles that must be overcome when structuring a renewal: 1. Syndicate-Based Funding:  When funders rely on syndicates, they distribute returns and capital recovery in proportion to each participant’s stake. While the IRR of the deal itself remains unchanged, funders must consider whether refinancing enhances their overall retained return and whether syndicate terms allow for flexible reinvestment. Additionally, participation structures—such as fees charged to syndicate investors or differential return sharing—may impact the net profitability of the funder. 2. Debt-Financed Funding:  Funders who rely on loans to finance cash advances must consider their cost of capital. If refinancing does not produce an IRR that surpasses the loan's interest rate or hurdle rate, it may not be a viable strategy. Additionally, lenders may impose covenants or restrictions that influence refinancing decisions. 3. Self-Funded Model: Funders using their capital have the most flexibility but must ensure that ROE remains high to justify continued reinvestment. Since capital is being recycled, maintaining a strong compounding effect is critical for sustained profitability.   When Should a Funder Refinance? Not all MCA cash advances are suited for refinancing. The funder should consider: 1. The Borrower’s Revenue Stability:  MCA transactions depend heavily on the borrower’s revenue cycles. If revenue fluctuations suggest instability, refinancing could increase the risk of default. 2. The Competitive Cash Advance Environment:  The presence of other MCA providers willing to offer refinancing may impact borrower behavior and pricing strategies. 3. Market Conditions:  Economic downturns or changes in industry trends can heavily impact revenue-based repayment models.   Measuring Refinancing Performance To assess whether refinancing is a beneficial strategy in MCA transactions, funders should implement during and post-cash advance performance reviews. Key indicators include: - Actual vs. Expected Cash Flow Performance: Tracking whether the borrower meets the refinanced obligations as projected. - Comparison of IRR, EAA, and ROE:  Evaluating whether the refinancing achieved a higher effective return compared to maintaining the original cash advance structure. A focus on continuous IRR ensures that reinvestment profitability is accurately measured, while EAA provides an annualized profitability comparison across deals of different durations. - Borrower Retention and Refinancing Cycles : MCA transactions often rely on repeated refinancing. Measuring borrower retention and refinancing frequency can indicate long-term profitability. - Default and Delinquency Trends : Monitoring borrower performance to adjust future refinancing strategies accordingly. MCA cash advances, due to their frequent payment cycles, require more immediate oversight.   Conclusion Effective refinancing strategies also on having the proper tools to monitor deals, track cash flows, analyze default profiles, and assess overall portfolio performance. A data-driven approach enables funders to integrate information from individual transactions upwards, providing a comprehensive view of trends and risks. By leveraging technology and analytics, funders can make instantaneous, informed, and strategic decisions that optimize capital deployment and enhance profitability. Refinancing in MCA transactions presents a unique opportunity for funders to accelerate cash flow and compounding returns. However, it requires careful assessment of borrower revenue stability, repayment sustainability, and market conditions. Additionally, the funding structure plays a crucial role in determining whether refinancing improves the funder’s overall return, as syndicates, loans, and self-funding models have different revenue recognition methodologies and cost structures. By focusing on ROE, IRR as a continuous return metric, EAA for standardized deal comparisons, and borrower financial health, funders can make informed decisions that balance profitability with sustainability. Ultimately, the success of refinancing depends on structured evaluation, prudent risk management, and strategic commercial considerations tailored to the nature of MCA transactions. Rodrigo Fritis NISO 305-205-8465 www.nisocorp.com Rodrigo.fritis@nisocorp.com

Wendell Smallwood Jr. Former Philadelphia Eagles running back Wendell Smallwood Jr. is facing serious legal repercussions as he has been charged with multiple felonies related to COVID-19 relief fraud. Smallwood, who was part of the Eagles' Super Bowl-winning team, is accused of submitting fraudulent applications to both the Economic Injury Disaster Loan (EIDL) program and the Paycheck Protection Program (PPP). The charges include wire fraud, conspiracy to commit wire fraud, and conspiracy to defraud the IRS, with a potential prison sentence of up to 50 years. According to federal prosecutors, Smallwood allegedly submitted false information on behalf of several businesses—some of which were either defunct or newly registered—to secure over $46,000 in EIDL loans. These funds were not used for legitimate business expenses but were instead funneled into his personal accounts. Additionally, Smallwood is accused of orchestrating a scheme that involved submitting fraudulent PPP applications for at least 13 sole proprietorships, resulting in approximately $269,000 in loan proceeds. He reportedly received kickbacks ranging from $4,000 to $12,000 for facilitating these loans. The implications of Smallwood's case extend beyond his personal legal troubles; it reflects a broader crackdown by the Department of Justice on individuals exploiting pandemic relief programs. The DOJ has ramped up efforts to investigate and prosecute those suspected of defrauding these federal assistance programs, which were designed to support businesses during a time of unprecedented economic hardship. As investigations continue, Smallwood's case serves as a cautionary tale for others who may have engaged in similar fraudulent activities. A plea hearing is scheduled for December 20, where further details may emerge regarding his cooperation with authorities and potential sentencing outcomes.

The Consumer Financial Protection Bureau (CFPB) plays a critical role in safeguarding both consumers and businesses from financial malpractice. Recently, it has found itself entangled in a political and operational storm. The newly appointed Acting Director Russell Vought has made a controversial decision to close the CFPB headquarters and halt nearly all regulatory activities. This sudden change has led to considerable uproar among employees, unions, and industry watchers. What is Causing the Controversy? On February 9, Acting Director Russell Vought issued a directive instructing CFPB staff to cease all enforcement actions, investigations, and rulemaking activities. Employees were advised to work remotely, and the headquarters is to remain closed until February 14. Such actions effectively put the agency's operations on pause. Ongoing cases and regulatory oversight now hang in the balance. Moreover, representatives from Elon Musk’s Department of Government Efficiency (DOGE) have been spotted at the CFPB headquarters. They are tasked with identifying inefficiencies in government operations. There are reports that DOGE personnel gained access to sensitive agency data, including performance reviews of employees. Musk has long been a critic of the CFPB, advocating for its dismantling. He expressed his sentiments on social media, posting “CFPB RIP” to underline his position. In response, the union representing CFPB employees filed a lawsuit against Vought. They argue that his actions are unlawful and jeopardize the agency's mission. Protesters gathered outside the CFPB headquarters over the weekend, blaming Musk and President Trump for undermining democracy and consumer protections. The Challenge for Business Lenders For business lenders and fintech companies, the current situation presents a complex dilemma. Many industry professionals supported President Trump during his administration, drawn by promises of deregulation and pro-business policies. However, the full shutdown of CFPB operations raises significant concerns: Lack of Oversight: Without the CFPB actively enforcing regulations, predatory lending practices may flourish. This harms not just consumers and business owners but also creates an uneven landscape for ethical lenders who play by the rules. In the high-risk world of Merchant Cash Advances (MCAs), this could be seen as an opportunity for unethical practices, albeit a temporary one. Ongoing Cases in Jeopardy: The suspension of investigations jeopardizes cases already in motion against bad actors within the financial sector. This leaves both consumers and businesses at risk of exploitation. Reputational Risks: For businesses reliant on consumer trust, such as fintech firms, perceptions of regulatory chaos could diminish confidence in financial products and services. The potential damage to reputation can have lasting effects. Market Instability: Uncertainty around the CFPB’s future could create volatility in lending markets. Businesses may hesitate to make long-term commitments when clear regulatory guidance is lacking. A Call for Balance in Regulation Deregulation can foster innovation and lower costs for businesses, but it must be executed thoughtfully. The sudden pause on CFPB operations raises questions about whether these actions compromise the agency's fundamental goal: to protect consumers and business owners while ensuring fair competition. Consumer Protections: A Necessity for Trust Consumer protections are not just regulatory formalities; they are essential for building trust. When consumers feel safe, they are more likely to engage with financial products and services. A strong regulatory framework helps ensure that businesses operate fairly and transparently. Integrating the perspective that "supporting sensible regulations enhances sustainability" can change the discourse. Business leaders should advocate for reasonable regulations that promote a balance between innovation and consumer safeguards. Navigating Through These Turbulent Times For business leaders in the lending and fintech sectors, this moment presents a challenge. Aligning support for sensible regulation is not contradictory to being pro-business. Instead, it guarantees a stable environment where innovation can flourish without sacrificing consumer trust. As unions contest Vought’s directives in court and protests persist outside the CFPB headquarters, one thing stands out: the stakes are incredibly high—not just for regulators, but for everyone within the financial ecosystem. The coming weeks will shed light on whether this significant shift at the CFPB is merely a temporary disruption or indicative of deeper, more lasting changes. Stay tuned as we continue to monitor this unfolding story. Both businesses and consumers must prepare themselves for a potentially turbulent ride ahead. The future of the CFPB remains uncertain, but the need for consumer protections is more crucial than ever. ---wix---

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. Click to watch Demo 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.