Embedded finance providers are more likely to finance women-led SMEs, study shows

By Puja Sharma

–Around 30% of YouLend’s financing goes to female-led businesses, more than twice the UK average of 12%

–Over 58% of capital from YouLend reached entrepreneurs in the UK’s most deprived regions

A new report by YouLend, a leading global embedded finance platform, conducted in partnership with Experian, the world’s leading global information services company, found that YouLend attracted 12% more applications from female-led businesses and was more than twice as likely to finance female-led businesses than the UK average.

The Widening Access to Capital Report indicates that embedded financing models are more effective than traditional banks in providing capital to female-led SMEs. Analysing over 100,000 cases of merchant financing from YouLend and comparing it to Experian’s data about the market, the study also uncovered that last year YouLend offered 90% approval rates for applicants, well above the 64% average in the UK.

Commenting on the findings, Mikkel Sølvsten Velin, YouLend Co-Founder and Co-CEO, said, “Our report confirmed that female-led businesses face more barriers when accessing much-needed finance than male-led businesses do. Positively, we also found that embedded finance can break down those barriers through new distribution channels and unbiased underwriting models.”

He concludes: “Whilst we are proud of our social impact at YouLend, there is much more to be done to ensure equitable access to finance for businesses in the UK, particularly during the cost of living crisis.”

YouLend and Experian’s study reveals that embedded financing models are generally more effective in providing capital for underserved communities in the UK. Embedded finance models place financial products in a nonfinancial customer experience, journey, or platform without redirecting to traditional financial institutions. This allows excluded groups to apply for flexible, agnostic, and affordable financing.

For example:

• Over half (58%) of YouLend’s SME capital segment went toward the two most deprived regions in the UK
• 29% of all applications YouLend receives are from female-led businesses, outperforming the national average of 17% on application and approvals

Access to vital financial support for SMEs is essential to power growth on a local level. The data shows that by the end of H1 2023, SMEs contributed an additional £6.8 billion in revenue to the UK GDP and increased employee headcount by 14% by receiving financing from YouLend.

Women-led businesses receive 18% more of total funding at YouLend than UK average

Aggregate data from the British Business Bank suggests that female-led businesses could be more price-sensitive to the cost of external capital and are more likely to see the application process as a barrier, with concerns such as risk and time to cash ranking higher than other groups.

While 19% of all businesses are led by women, only 12% of total investments are directed towards women-led businesses. With our agnostic credit decisioning model, a greater proportion of YouLend financing is directed towards SMEs with female directors or equal leadership teams. 29% of all applications received by YouLend are female-led businesses, compared to 17% at national average, and YouLend approves 30% of total funding for female-led businesses, compared to the UK average of 12%.