How Embedded Lending Works: Step-by-Step for SaaS Platforms
Learn how embedded lending works step-by-step for SaaS platforms. Boost retention, revenue, and merchant growth with this founder-friendly guide.
Introduction: Why This Matters
You know the drill: your merchants need working capital to grow, but traditional lenders take weeks, pile on paperwork, and often say “no.” Meanwhile, churn increases, competitors win loyalty, and your platform leaves money on the table.
The solution? Embedded lending.
It lets you offer financing inside your platform, in real time, based on your merchants’ actual business activity. No bank branches, no waiting. Just fast capital and stronger relationships.
Step-by-Step: How Embedded Lending Works
1. Merchant Activity Captured
Your SaaS platform already tracks valuable data—sales, invoices, payments, bookings, or deliveries. This becomes the foundation for lending.
2. Data-Driven Risk Scoring
Instead of old-school credit scores, you use a Merchant Health Score based on real performance. This means better accuracy and more approvals for your users.
3. Pre-Qualified Offers Displayed
Merchants see financing offers directly in your dashboard. No external forms, no clunky bank sites. Just a clear “You’re pre-qualified for $15,000” message.
4. Funding Partner Provides Capital
You don’t need to become a bank. Licensed lending partners supply the funds. You simply provide the rails and the customer relationship.
5. Seamless Repayments
Repayments happen automatically—deducted from merchant payouts, invoices, or transactions. For merchants, it feels invisible. For you, it means higher repayment rates.
✅ Checklist: Is Your Platform Ready?
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You process payments, transactions, or invoices.
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You already have trust and daily engagement with merchants.
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You want a new revenue stream (lending margins are high).
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You have a partner to handle compliance and capital.
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You’re ready to invest in user experience.
⚠️ Common Mistakes to Avoid
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Ignoring compliance → Always partner with licensed lenders.
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Overcomplicating UX → Keep it one-click simple.
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Failing to educate merchants → Explain terms clearly to build trust.
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Rushing without data models → Weak scoring = high defaults.
Takeaway:
Embedded lending isn’t rocket science, it’s just about using your data to help merchants grow. Done right, it makes your platform indispensable, increases stickiness, and adds serious revenue.
If your merchants are already asking for loans, it’s time to stop saying, “Sorry, we don’t do that.”
👉 Ready to explore embedded lending for your SaaS or marketplace? Talk to us here: richie.ai
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