Embedded finance creating faster loan applications for small businesses

17th August 2021

New data from small business lender specialist, iwoca has revealed how embedded finance will play a vital role for small businesses as they look to recover from the pandemic.

In Q1 2021, iwoca data shows that 50% of customers who applied through an embedded finance partner received a lending decision in less than two minutes, compared with 12% of direct applications. In addition, small business applications via embedded finance partnerships are 58% more likely to be approved than those that applied to iwoca directly.

Nearly 30% of all loan applications to iwoca now come through embedded finance partners. Businesses can access loans from iwoca through a range of platforms such as accounting software and digital neo-banks including Xero, Tide and Funding Options. This makes the process of applying for finance far simpler for SMEs as loan offers are readily available in the services they use day-to-day.

In addition, these platforms hold much of a company’s financial information – such as cash flow and trading performance data- that a lender would need to review a loan application. This allows iwoca to make faster decisions and to tailor products to a customer’s individual needs, which translates to greater chances of getting approved for finance.

Access to finance will be key in helping SMEs get back on track following the impact of the Covid-19 crisis. However, with the closure of the Bounce Back Loan Scheme many high street banks are likely to reduce their lending to small and micro businesses as their risk appetite narrows. Alternative lenders can fill this gap, with embedded finance integrations providing small businesses with simple access to the finance they need.

The company launched its own OpenLending platform following the £10 million Capability and Innovation Fund award from the Banking Competition Remedies in 2019, which allows partners to integrate seamlessly with iwoca’s lending API with the company created over 20 embedded finance partnerships, with more expected to be announced over the coming months.

Colin Goldstein, Commercial Growth Director at iwoca said “The technology behind embedded finance has huge potential for SMEs, and the possibilities to embed finance are vast. Small businesses are already benefiting from embedded finance through faster and more successful loan applications.”

“iwoca has led the way in developing embedded finance products, and well over a quarter of businesses we are now serving come through our embedded finance partners. Accelerating this should be a central pillar to rebuilding our economy, and we look forward to working with more partners to help their small business customers get the finance they need.”