How data sharing can unlock better credit opportunities for SMBs

By Gloria Methri

In today’s challenging economic environment, small to mid-sized businesses (SMBs) face increasing pressure to secure accessible financing to address potential gaps in cash flow. One innovative solution that has emerged is embedded lending—credit integrated directly into purchase platforms, allowing borrowers to apply for financing seamlessly as they make purchases.

While this approach presents a fast and convenient option for SMBs, it often hinges on the real-time sharing of financial data, which can make many borrowers apprehensive.

However, PYMNTS Intelligence research reveals that businesses willing to share financial data in real-time—as in the case of embedded lending—not only achieve greater satisfaction with their credit options but also borrow more money.

Data Sharing is a requisite for lenders

For lenders, having access to real-time financial data is non-negotiable when offering embedded lending solutions. This access enables them to understand a company’s specific needs better, assess risks, and create more tailored lending products. According to PYMNTS Intelligence research, 100% of lenders in the United States, the United Kingdom, and Australia consider access to real-time data vital for offering embedded lending products to SMBs.

Fortunately for lenders and businesses alike, 93% of U.S. lenders have access to this data most or all the time, while 92% of U.K. lenders and 100% of Australian lenders report similar capabilities. This availability allows lenders to evaluate a company’s cash flow stability, a critical factor in determining credit needs and risks.

Overcoming SMBs’ reluctance to share data

Despite the clear benefits for lenders, many SMBs are hesitant to share their financial data. PYMNTS data reveals stark differences in comfort levels across countries. For instance, 71% of small businesses in India feel very comfortable sharing financial data for embedded lending options. In contrast, only 37% of Australian companies and a mere 13% of Japanese enterprises share the same sentiment.

This reluctance often stems from a combination of mistrust regarding how lenders will use the data and a lack of awareness about the benefits of sharing it. The research indicates that previous experience with lending significantly influences a company’s willingness to share data.

For example, 73% of microbusinesses and small businesses that have used embedded lending in the past year report feeling highly comfortable sharing their data again. In contrast, only 47% of those who have used other forms of lending feel similarly, while just 37% of businesses that have not accessed any credit express comfort in sharing their data.

How data sharing impacts borrowing

The research clearly suggests that businesses utilising lending solutions requiring real-time data access, such as embedded lending, experience greater satisfaction with their available credit options.

In fact, 72% of microbusinesses and small businesses using embedded lending reports are extremely satisfied with their current credit tools, compared to only 57% of those who have used other lending types. This higher satisfaction rate indicates that when lenders can access SMBs’ real-time financial data, they are better positioned to offer optimised loan amounts and tailored solutions, thereby enhancing borrower satisfaction.

Additionally, businesses using embedded lending tend to borrow significantly more—an average of $235,000—48% more than firms relying on other types of lending. This statistic underscores the potential financial benefits of real-time data sharing for both lenders and borrowers.

Moreover, SMBs’ willingness to switch providers for better lending options reveals a strong preference for embedded lending solutions. Approximately 69% of microbusinesses and small businesses are highly likely to switch to a provider offering embedded lending options. This figure drops to 38% for companies that have previously used other types of lending and further decreases to 29% for those that have not utilised any credit.

The reports highlight a critical opportunity for lenders to bridge the gap in data sharing. By effectively communicating the benefits and reassuring SMBs about the usage of their financial data, lenders can help alleviate concerns and build trust. As more businesses gain familiarity and comfort with embedded lending, they are likely to seek out providers offering these solutions, leading to greater satisfaction and increased borrowing potential.