Unlocking growth: How software providers can leverage embedded lending

For independent software vendors (ISVs), the evolving needs of merchant clients are constantly influencing the solutions and services ISVs aim to provide. From integrated payments to cloud-based customer management systems, being a one-stop shop for the merchants you serve can help your business stay relevant and competitive. One area of opportunity in this arena is lending opportunities* – a critical element for merchants looking to manage cash flow, invest in growth or navigate unexpected expenses.

Cash flow issues are a major pain point for merchants. CB Insights reports that 38 percent of startups fail because they run out of cash or fail to raise new funding. Managing cash flow is essential to the survival rate of a business. Research shows that SMBs who regularly monitor and forecast their cash flow are more likely to survive economic downturns and maintain steady growth. Proactive cash flow management—such as budgeting, forecasting and payment follow-up—often makes the difference between riding out a tough quarter or facing potential insolvency.

In addition to timely financial planning, access to lending solutions can make or break a company. 28 percent of business owners report to borrowing on a regular basis to keep their companies healthy, and SMBs with accessible credit lines, strong banking relationships or adequate financing options are better able to cope with sudden shortfalls and seize new opportunities without falling behind on financial obligations.

What does this mean for ISVs?

Traditionally, merchants seeking funding would go to their bank. While a valid option, it’s a process that could be lengthy or even inaccessible to some business, given that only 44 percent of SMBs report having access to financing and cash advance solutions. But what if merchants could secure funds directly from their software provider?

Why offer embedded lending?

ISVs looking to support their merchants in multiple aspects of their business journey should consider integrating cash advances directly within their software environment. This approach, known as embedded lending, offers a streamlined pathway for merchants to secure the funds they need at the moment they need them most.

Here are a few reasons to consider offering embedded lending as a tool for empowering merchant growth:

1. Enhances the merchant experience

One of the main advantages of embedded lending is the improved experience it offers to merchants. By providing pre-approved funding options within the ISV's platform, merchants can typically bypass the complexities of external applications. Transaction data already captured by the ISV's software can be leveraged (with appropriate permissions and privacy considerations) to streamline the pre-approval process, leading to faster decisions and quicker access to funds. This convenience can help significantly improve merchant satisfaction and lead to greater loyalty and merchant retention on the platform.

2. Encourages a sticky ecosystem

Integrating valuable services like embedded lending can also contribute to a stickier ecosystem for software providers. When merchants can access critical financial tools directly within their familiar software, they are less likely to seek alternative solutions. This deeper integration strengthens the partnership between the ISV and the merchant, creating a more resilient and mutually beneficial relationship.

3. Bolsters a strategic advantage

In a competitive market, software providers are constantly seeking ways to differentiate their offerings. By providing embedded lending capabilities, ISVs can position themselves as more than just a software providers; they become a strategic partner in their merchants' success. Offering access to lending demonstrates a deeper understanding of merchant needs and a commitment to supporting their growth. This can be a significant differentiator, attracting new merchants and retaining existing ones.

The integration of cash-advance solutions presents a significant opportunity for software providers to enhance their platforms and strengthen their relationships with merchants. By offering seamless access to pre-approved funding, software providers can improve the merchant experience, create a stickier ecosystem, and gain a strategic advantage in the market. Solutions that facilitate this integration can empower software providers to meet a critical need for their merchants, fostering growth and mutual success.

*Funding is offered exclusively by Finova Capital and is not provided by Deluxe Corporation or Deluxe Merchant Services. This is not a guaranteed offer of approval. Invitations to apply are based on business information and are subject to Finova’s underwriting guidelines, application requirements and final approval.