Embedded Finance: The New Lifeline for Small Business Survival & Growth

LONDON, UK – December 04, 2025

In an economic climate defined by persistent inflation and rising operational costs, small and medium-sized businesses (SMBs) are navigating a treacherous landscape. For many, access to timely capital is not just a matter of growth but of survival. A groundbreaking new report from embedded finance provider Liberis reveals a powerful trend reshaping this dynamic: financing integrated directly into the digital platforms businesses use every day is becoming a critical lifeline, unlocking growth for those long overlooked by traditional lenders.

The firm's latest Impact Report, a survey of over 1,700 SMBs, found that a staggering 63% secured their first-ever business funding through an embedded finance solution. The results were transformative, with businesses reporting an average revenue increase of 26% in the year following the funding. For a significant portion, the impact was even more profound; over 400 businesses indicated the capital may have prevented their imminent closure.

A Widening Chasm in Traditional Lending

The rise of embedded finance highlights a growing disconnect between the needs of modern small businesses and the offerings of conventional financial institutions. Liberis's research exposes deep fractures in the traditional lending process, with 72% of its SMB customers having never accessed funding before. The barriers are both high and numerous.

Among respondents who struggled to secure capital through banks, 48% cited outright application rejection as the primary obstacle. Another 42% felt that lenders simply “didn’t understand their business type,” a common complaint for the 69% of US respondents operating e-commerce businesses or the 34% of UK operators in hospitality. These findings align with broader market data. The Federal Reserve's 2024 Small Business Credit Survey noted a decline in application rates for traditional financing, with only 41% of applicants receiving the full amount they sought.

Traditional underwriting models, heavily reliant on historical credit scores, extensive documentation, and physical collateral, often fail to accurately assess the viability of digital-first or service-based businesses. This systemic mismatch leaves many of the economy's most dynamic entrepreneurs without the fuel they need to expand, manage inventory, or even weather a slow season.

The Embedded Solution: Speed, Data, and Integration

Embedded finance offers a fundamentally different approach. By integrating funding solutions directly into the software and platforms that SMBs use daily—such as e-commerce sites like eBay, payment processors like Worldpay, or business management tools like Vagaro—providers can offer capital at the precise moment of need. For 72% of the businesses surveyed by Liberis, this represented their first successful foray into business financing.

The model's power lies in its use of real-time, alternative data. Instead of relying on static credit reports, embedded lenders analyze live transaction volumes, sales history, and seasonal trends directly from the partner platform. This allows for more accurate risk assessments and lightning-fast decisions. Liberis reports it can deliver funding in as little as four hours from application, a stark contrast to the weeks or even months associated with traditional bank loans. This velocity is critical, especially for the 58% of businesses who require extra capital to manage seasonal peaks.

"Small businesses are navigating a perfect storm of inflation, rising costs, and fragmented access to finance. Our research proves that embedded finance isn't just convenient, it's transformative," said Rob Fairfield, CEO of Liberis, in the report's press release. "When you deliver the right funding at the right time, through platforms businesses already trust, you unlock genuine growth."

This growth is tangible. According to the report, 68% of businesses used the funds to invest in new stock and inventory, 21% purchased new equipment, and 18% ramped up marketing to acquire new customers.

More Than a Loan: The Platform-Partner Symbiosis

The benefits of embedded finance extend beyond the small businesses receiving capital. For the digital platforms that integrate these financial products, it represents a powerful strategic evolution. By becoming a one-stop shop for both operational and financial needs, platforms can dramatically increase user loyalty and create new, valuable revenue streams.

The Liberis report quantifies this effect, revealing that 68% of SMBs would likely stay with their current platform if it offered more financial products. This “stickiness” is particularly strong among US businesses, where the figure rises to 74%. In a competitive digital landscape, embedding finance becomes a key differentiator.

"For our partners, embedded finance is more than a product feature, it's a retention and growth engine," Fairfield added. "Businesses that feel financially supported become stickier customers. When platforms expand their financial offerings, they're not just helping their customers grow; they're future-proofing their own business model."

This symbiotic relationship is driving a market projected to reach $320 billion by 2030. Platforms provide access to a large, pre-vetted customer base and rich data, while finance providers like Liberis supply the technology and capital, creating an efficient ecosystem that benefits all parties.

Fueling Resilience in a Turbulent Economy

Beyond individual success stories, the widespread adoption of embedded finance has significant macroeconomic implications. In an era where 67% of SMBs cite inflation as their top challenge, accessible and flexible capital acts as a powerful stabilizing force. The Liberis report found that 55% of respondents agreed the funding helped them withstand external economic pressures, while 47% stated they would have missed critical growth opportunities without it.

This financial backstop translates directly into community-level impact. Many businesses reported that the funding enabled them to create or save at least one job, with nearly a third preserving or adding between two and five roles. This demonstrates how democratizing access to capital can foster grassroots job creation and support local economies.

As the embedded finance market matures, it is attracting increased attention from regulators. Experts note that ensuring robust consumer protection, transparent data sharing practices, and clear liability frameworks between banks, fintechs, and platforms will be the next critical step. Navigating this evolving regulatory landscape will be key to sustaining the sector's growth and ensuring its long-term stability as a pillar of the modern SMB economy.