Embedded lending needs more than embedded forms

By Gurprit Singh Gujral, Founder and CEO of LoanTube

Embedded lending was designed to transform how SMEs access finance by integrating credit directly into the digital tools they use to run their businesses. In theory, this should deliver seamless, contextual access to funding at the exact moment it is needed. In practice, many current offerings fall short, bogged down by static forms, manual follow-ups and long wait times that undermine the promise of a frictionless digital experience.

To realise the full potential of what can be called Embedded Lending 2.0, the industry must focus on delivering tangible, measurable outcomes for businesses. This shift is especially urgent, given the scale of the SME funding gap.

While high street bank lending to smaller businesses rose in early 2025, total volumes remain below pre-pandemic levels. Challenger and specialist banks now account for over 60% of SME lending, yet an estimated $27 billion annual debt funding gap persists. This gap has proven stubborn, with repeated initiatives failing to make a significant difference. That suggests the problem is not simply the availability of capital, but deeper flaws in how the access points to finance are created for SMEs.

Surveys reveal that around six in ten small firms do not seek finance simply because they are unaware of the products available to them. At the same time, research indicates that more than seven in ten say a previous rejection has discouraged them from applying again. These combined facts have contributed to a steady fall in demand for credit, with overall SME lending declining by roughly 20% in real terms over the past decade. 

As a result, countless SMEs remain underserved and overlooked by both traditional and digital finance providers. Lacking dedicated financial expertise, many business owners struggle to access funding that truly meets their needs. Embedded lending offers a powerful solution by integrating credit directly into the platforms SMEs already rely on, from accounting tools and point-of-sale systems to eCommerce platforms. This makes finance more timely, relevant, and effortlessly accessible.

Embedded Lending 2.0

Effective embedded lending solutions make full use of the data-rich environments they sit within. Through the analysis of transaction history, cash flow and other real-time business metrics, eligibility can be assessed and pre-qualified loans can be offered in real time. This goes beyond simply embedding a loan application form, it’s about embedding real outcomes. By meeting SMEs where they already operate, we can shift finance from being a separate, stressful task to a seamless part of running their business.

Unfortunately, for the most part, this method of lending has struggled to realise its full potential. This is largely because many embedded offerings stop at surface-level integration, often just redirecting clients to clunky journeys where they’re asked to re-enter details, making slow credit decisions on outdated data, or pushing generic products that don’t reflect the realities of small businesses.

Fortunately, the evolution of open banking into open finance will underpin the evolution toward Embedded Lending 2.0. The Bank of England has outlined the potential of open data to transform SME lending while initiatives such as the Centre for Finance, Innovation and Technology’s coalition and the Open Finance Taskforce are working to create secure, interoperable data-sharing frameworks. Together, these efforts are paving the way for lenders to integrate more seamlessly into the digital environments SMEs already use, enabling real-time underwriting and reducing reliance on outdated credit models.

Brokers’ Role Even More Crucial

As embedded lending evolves, the role of brokers will become even more critical, not just as distributors, but as curators of choice and enablers of fairer outcomes. Lenders alone cannot guarantee that credit reaches the right businesses, in the right way. What brokers bring is a layer of human and algorithmic intelligence that translates complexity into clarity for SMEs.

Unlike lender-led offerings, embedding a broker based platform provides access to offers from a wide panel of lenders, often 50 or more. This gives businesses, especially those outside the mainstream, a better chance of finding solutions that match their real risk profile and growth potential. Further than this, brokers also play an advisory role, helping SMEs understand not just what they can borrow, but what they should. This guidance helps businesses make lending choices that are proportionate, sustainable and aligned with their goals.

This is especially vital in today’s climate, where over 70% of SMEs would prefer to limit growth rather than take on debt. Brokers can shift that narrative, not by pushing credit, but by offering context, optionality and confidence. In doing so, they help embedded lending deliver on its real promise: inclusive growth, backed by informed decision-making.

What is clear to all is that as lenders, brokers, platforms and policymakers commit to building with intention, embedded lending can do more than close the SME funding gap, it can reshape the lending ecosystem into one that is faster, fairer and built around the long-term success of small businesses.