Embedded Lending for SaaS Platforms and Acquirers: The Growth and Retention Model

A merchant can have customers ready to buy and still lack the cash to buy inventory, replace equipment, or staff the next busy period. The processor sees payment activity. The software platform sees how the business operates. A financing partner can use permitted data from those relationships to evaluate a funding request.

That is the opportunity in embedded lending: connect a business need with financing inside a relationship the merchant already uses.

For acquirers, ISOs, and independent software vendors, the commercial case extends beyond a financing referral fee. Capital used productively may help a merchant fulfill more orders, accept more payments, and get more value from the platform. Delivering that service well gives the merchant another reason to stay.

The execution matters. A convenient application cannot repair unsuitable repayment terms. A large merchant base does not mean every account qualifies. And a software integration does not, by itself, determine who bears credit losses.

What embedded lending actually means

Embedded lending places access to credit within another product or business workflow. A merchant might encounter it in a point-of-sale dashboard, an inventory application, an accounting system, or a processor’s merchant portal.

Embedded finance is the broader category. It can include payments, accounts, insurance, and other financial services. Embedded lending is one part of it. This guide focuses on financing for the merchant’s business; consumer installment payments at checkout are a different use case.

The word “embedded” describes distribution and experience. It does not identify the legal product. The underlying financing could be a term loan, a revolving line, invoice financing, or a purchase of future receivables. Product names, repayment obligations, and risk allocation come from the actual agreements.

CGAP’s research on fintech for micro and small enterprises distinguishes businesses that provide financial services themselves from those that integrate services through financial partners. That distinction is central to this article: a platform can distribute financing while a separate organization supplies the financing operation.

Why acquiring teams should care

Attract merchants with a more useful relationship

Processing price is easy to compare. Operational support is harder to replace. Access to appropriately structured financing gives a sales or account-management team another business problem it can help address.

The offer should be specific: a convenient route to apply for financing, subject to the funding partner’s criteria and terms. A new merchant should never be told that moving processing guarantees a loan. Historical payment data might support an application if the partner accepts it, but switching processors does not create creditworthiness.

Help merchants turn capacity into transactions

Consider three illustrative situations. A retailer wants inventory ahead of a selling season. A restaurant needs to replace equipment that limits service. A repair business has demand for additional jobs but needs parts before customers pay.

If financing resolves the constraint and the investment succeeds, the merchant may generate additional sales. The acquiring relationship benefits only to the extent those sales generate payments through that relationship at a positive contribution margin. Some spending produces no new sales; some sales arrive by other payment methods or through another processor.

This is a commercial hypothesis to test. Loan proceeds deposited into a merchant’s bank account are not payment-processing volume.

Build retention through continuing usefulness

A helpful financing experience can reinforce confidence in the software or payments partner that made access easier. Follow-up on the business outcome also gives account teams a reason to have a substantive conversation beyond rates and statements.

Retention should come from a relationship worth keeping. Contractual repayment or processing-continuity requirements are separate matters, and merchants need to understand them before accepting financing. Staying because a service is useful and staying because an agreement restricts a change should not be treated as the same result.

Evaluate the full economics

The acquiring business case has three potential benefits: financing compensation where the agreement provides it, incremental processing contribution, and the value of a longer merchant relationship. Against those sit integration, support, compliance, partner-management, and any contractual risk costs.

An ISO’s residual share, an acquirer’s net processing margin, and an ISV’s software revenue are different revenue streams. Calculate each at the organization that actually receives it. Avoid counting the same merchant value twice.

What borrower research tells us

Current U.S. financing demand

The Federal Reserve Banks’ 2026 Report on Employer Firms uses the 2025 Small Business Credit Survey. Among surveyed employer firms, 38% applied for a loan, line of credit, or merchant cash advance in the preceding 12 months. Among applicants for financing of any type, 56% cited operating expenses and 46% cited expansion, a new opportunity, or acquiring business assets; respondents could select multiple reasons. Federal Reserve report, printed pages 10 and 13.

Those findings make two merchant conversations relevant: managing the timing of cash and funding an investment. They require different questions about repayment capacity.

The survey covers U.S. employer businesses with 1–499 employees. It uses a weighted convenience sample, and the reporting year is later than the survey year. These are small-business financing findings, not embedded-lending adoption rates or forecasts for an acquiring portfolio.

Evidence specifically about embedded lending

In a July 2024 study commissioned by Visa, PYMNTS Intelligence surveyed 3,160 micro and small businesses across six countries. Embedded-lending users were more likely than users of other lending to report high satisfaction with the availability of credit tools: 72.3% versus 57.1%. Across the full sample, 41% considered integration of embedded lending into enterprise resource planning software very or extremely important. Original study, figures 3 and 9.

This supports taking the software experience seriously. It does not establish that embedded lending caused better outcomes. The study is multinational, includes a broad range of embedded credit products, and measures reported experience and preferences. It is not a U.S. acquirer retention experiment.

The practical question for a SaaS platform is whether capital is available at the moment its merchant is planning an investment or facing a timing gap. Putting a financing link somewhere in the navigation is only the beginning.

Which industries and MCCs deserve attention?

Industry data help identify where to investigate demand. They do not replace underwriting.

The Federal Reserve’s 2026 industry chartbook reports the following figures for five selected industry groups. Both columns describe the preceding 12 months, but their denominators differ.

Source: Federal Reserve industry chartbook, pages 30 and 36. “Any financing” includes products beyond loans and MCAs. The MCA column is not an MCA approval rate or embedded-lending usage rate. Respondents could apply for multiple products.

For a vertical software company, the useful next step is to connect those broad needs with its own customers’ workflows. Hospitality businesses may need operating liquidity or equipment. Retailers may need inventory. Service businesses may need capacity before customer collections arrive. These are use cases to validate with merchants and funding partners, rather than a claim that an entire industry should borrow.

MCC describes activity; it does not demonstrate loan demand

A merchant category code identifies the nature of a card-accepting business. The Federal Reserve’s industry groups use NAICS-based classifications. There is no reliable one-to-one conversion from those survey percentages into MCC application or approval rates.

Useful MCC examples for a portfolio discussion include the following:

The codes are examples from Visa’s public Merchant Data Standards Manual, April 2026. The financing questions are operator recommendations. These examples are not a ranked demand list or an eligibility list. The merchant’s actual activity determines classification; the funding partner determines its financing criteria.

Payment acceptance and financing approval are separate decisions. A merchant acceptable to an acquiring program can still fall outside a funding partner’s industry, geography, operating-history, or credit parameters. Changing a correct MCC to seek approval is not an appropriate solution.

Business size, processing volume, and geographic fit

Revenue is not processing volume

The Federal Reserve’s revenue-size chartbook shows differences in where businesses seek credit. Among loan, line-of-credit, or MCA applicants, the share applying to online lenders was 26% for firms with annual revenue at or below $100,000; 39% above $100,000 through $1 million; 21% above $1 million through $10 million; and 10% above $10 million. These are annual business revenue bands, not merchant-processing bands. Revenue-size chartbook, page 37.

Those figures describe application channels. They do not tell us the typical card volume of a funded embedded-lending merchant. The sources reviewed for this guide do not establish a reliable national median for that measure.

Keep four concepts separate:

• Business revenue: revenue across the merchant’s business, using the relevant accounting definition.
• Processed payment volume: payments handled through a defined processor, channel, and period, with clear treatment of refunds and reversals.
• Financing received: capital supplied under the financing agreement.
• Processing contribution: the acquiring business’s earnings after the costs and contractual shares relevant to it.

A business with substantial revenue can have modest card volume if it collects mainly by ACH, invoice, or check. A platform may observe only one location or one channel. Bank deposits can contain transfers, financing proceeds, or other receipts that are not sales.

For a useful portfolio benchmark, ask a prospective funding partner for funded-merchant processing-volume distributions by industry, geography, and business tenure. Require the observation period, median and quartiles, data coverage, and definition of volume. Separate first-time fundings from renewals and legal businesses from multiple merchant IDs. A minimum eligibility threshold is not a typical funded-borrower profile.

Geographic opportunity requires local fit

Financing demand is not confined to urban businesses. In the 2025 survey, 60% of both rural and urban employer firms applied for some type of financing. Among loan, line-of-credit, or MCA applicants, 22% of rural firms and 30% of urban firms applied to online lenders. Rural and urban chartbook, pages 30 and 37.

A platform’s geographic reach is not the same as a funding partner’s coverage. Confirm supported states or countries, eligible legal entities, currencies, data sources, and repayment rails. Cross-border expansion needs a separate product and operating assessment. A product available to a U.S. merchant is not automatically available to every merchant using the same software abroad.

Mentom can help a platform map the payments side of this exercise: its merchant onboarding, payment methods, integration points, and ongoing operating support. Financing coverage and approval remain questions for the selected funding partner.

How embedded financing compares with traditional credit

“Embedded” and “traditional” are not mutually exclusive product categories. A bank can distribute a loan through software. A nonbank can require a manual application. Compare the financing structure and terms separately from the distribution channel.

The Federal Reserve’s guide to small-business credit describes the range of financing structures. SBA’s 7(a) guidance explains that applications go through participating lenders and that most 7(a) term loans use monthly principal-and-interest payments. A bank or SBA-supported option may fit a merchant’s need well; an embedded channel should not discourage comparison.

The application advantage is operational

With permission and appropriate agreements, existing business and transaction information can reduce repeated data entry. A funding partner can review current activity rather than starting with an empty application. Some programs can surface indicative offers before the merchant begins the full process.

However, there can still be identity checks, business verification, bank-account validation, document requests, fraud review, and final underwriting. “Prequalified,” “approved,” “accepted,” and “funded” describe different states. Funding speed depends on the program and the individual application.

Repayment deserves as much attention as approval

A loan repaid according to sales is still a loan. A merchant cash advance may instead be structured as a purchase of receivables. A fixed fee is not an APR, and a repayment percentage is not the price of credit. The Federal Reserve explains why factor rates and annualized borrowing costs should not be treated as interchangeable.

If the agreement calculates remittances from sales, establish which sales count and when. Ask how refunds, missing data, seasonal closures, and changes in processing affect the calculation. Some arrangements include minimum payments, reconciliation provisions, or scheduled debits; others work differently. Never imply that every sales-based product automatically pauses collection when sales stop.

Also establish how money moves. A financing provider might debit a bank account using sales data to calculate the amount. Another arrangement might collect through an agreed settlement mechanism. A sales-based calculation does not itself prove that the processor withholds repayment from settlement.

A growth investment needs enough time to produce cash before repayment consumes it. Buying equipment today does not ensure that additional customers arrive tomorrow. That timing should drive product fit, alongside total cost and downside scenarios.

How one SaaS platform can serve many merchants

The technical advantage is a reusable connection between the software platform and a financing provider. The platform does not need to build a lending company for every merchant account. It does need a reliable way to identify each business and keep its financing activity separate.

The architecture has three distinct responsibilities: the platform presents the experience; a controlled integration exchanges permitted data and status; the funding operation evaluates the business and administers the financing.

Establish the merchant identity model

Map the SaaS tenant, legal business, owner or authorized representative, locations, processor merchant IDs, and funding-provider customer ID. These relationships are not necessarily one to one. One legal business may operate multiple locations and merchant IDs, while a franchise platform may serve many separately owned businesses.

Define the borrowing entity before aggregating sales. Combining unrelated merchants into one financing profile can distort both an offer and a repayment calculation. A store manager’s permission to issue refunds does not necessarily authorize that person to apply for financing or bind the business.

Make data coverage explicit

Useful inputs can include sales history, transaction counts, average ticket, seasonality, refunds, disputes, and permitted business records. The BIS’s analysis of platform lending explains why transaction and business-activity data can inform credit evaluation. It also cautions against assuming that early model results prove performance across a full economic cycle.

An acquiring team should define the data it actually observes. Distinguish authorizations from completed payments, gross activity from net activity, sales dates from settlement dates, and missing data from days with no sales. If bank or accounting data are needed, establish the authorized connection and its purpose.

Do not send raw card numbers simply because a financing integration requests “payment data.” Design for the minimum appropriate fields. The financing integration’s scope should be established independently from the platform’s checkout implementation.

Reuse infrastructure without sharing merchant access

One integration can serve many accounts, but every API request and interface session still needs authorization for the correct merchant. Keep provider credentials on the server and enforce access at the business-object level. A merchant identifier in a browser request is not sufficient proof of permission. OWASP’s guidance on object-level authorization explains this failure mode.

This is where the payments foundation matters. Mentom’s integrated payments offering includes APIs, embedded and hosted components, onboarding, and developer support. Those capabilities provide a starting point for mapping a broader merchant experience; a particular lending connection still needs to be scoped with its provider.

Integration options and the work after the API connects

An ISV does not have to begin with a fully custom application. There are several practical levels of integration.

Official integration documentation demonstrates that hosted, partially integrated, and fully embedded paths exist. It is evidence of available implementation patterns, not a recommendation of one funding provider or a claim that every provider offers identical capabilities.

The best initial path is the least complex one that meets the merchant’s needs and provides adequate control. A hosted journey can be a sensible first release. A deeper integration becomes worthwhile when it improves a specific workflow or removes measurable friction.

Design for asynchronous outcomes

Use separate records for the business, application, offer, agreement, disbursement, and repayment activity. A single field called “loan status” is often too coarse to explain what happened.

The platform should be able to distinguish an application needing information, an expired offer, a signed agreement awaiting funding, a successful disbursement, a returned transfer, and a completed financing. Provider documentation on application and financing states illustrates why acceptance and funding must remain separate.

Webhooks notify the platform of changes. They should be authenticated according to the provider’s specification; official webhook verification guidance illustrates signed notifications. Design the receiving system to handle duplicates and out-of-order delivery, and reconcile against the provider’s authoritative records. Do not rely solely on a browser redirect to declare funding complete.

These are recommended operating controls:

• Apply idempotency to supported create and submit operations; reconcile uncertain outcomes before retrying.
• Store provider event identifiers or a documented deduplication key.
• Queue processing, record failures, and support controlled replay without repeating financial actions.
• Show the merchant a useful status when information is missing or a provider is unavailable.
• Define which team resolves application, repayment, and technical questions.
• Keep credit applications, bank details, and decision data out of general website analytics.

Keep financing optional and the core software dependable

A funding-provider outage should not prevent a merchant from using the unrelated functions it relies on to operate. Separate financing availability from the platform’s core checkout or business workflow wherever the product architecture permits.

Plan for a change in merchant ownership, a new bank account, a processor migration, or termination of the platform relationship. The borrower may still owe money after leaving the software. The servicing arrangement and data obligations need to survive that transition in the manner the contracts require.

Separate lending responsibility from acquiring responsibility

For an acquiring team that wants an add-on service, the intended model is straightforward: the funding partner and its authorized lending and servicing entities own the financing operation. The acquiring or software partner distributes access and supports its part of the experience.

That allocation must be established in the agreements. Some programs transfer credit exposure to the funding side; others require guarantees, reserves, loss sharing, repurchases, or indemnities. The label “embedded lending” does not answer that question.

The ISO or ISV should not promise an approval, override a decline, change financing terms, or improvise a repayment accommodation it has no authority to grant. It can explain the process, help the merchant reach the responsible team, and resolve issues in its own integration.

Removing borrower default exposure from the distributor’s role does not eliminate data, marketing, contractual, or reputational responsibilities. Nor does it remove chargeback or other acquiring obligations. A distressed merchant can create problems in more than one relationship at once.

Jurisdiction also matters. For example, New York’s commercial-financing disclosure regulation specifies disclosures for covered offers, including distinct treatment of financing structures. Determine applicability and presentation responsibilities with the funding partner before launch. A branded interface is not a reason to obscure who provides the financing.

How to choose the right funding partner

Begin with merchant fit, then work through the commercial and technical details. A polished demo cannot compensate for a partner that declines most of the businesses your platform serves or offers terms that do not fit their cash cycles.

Portfolio fit. Request the current supported industries, geographies, entity types, operating-history expectations, and data requirements. Ask how recent processor migrations, multiple locations, seasonal businesses, and incomplete data are handled. Seek results for comparable cohorts, with denominators and time periods.

Product fit. Understand the legal structure, total borrowing cost, payment timing, guarantees, security interests, prepayment rules, and handling of a material sales decline. The funding partner should be able to explain those terms plainly enough for a merchant to compare options.

Operational ownership. Name the parties responsible for underwriting, disbursement, servicing, complaints, collections, and corrections. Confirm how escalations work and what the platform is allowed to tell the merchant. Make the funding and servicing continuity plan part of due diligence.

Technical fit. Review the sandbox, authentication, merchant-scoped sessions, events, reporting, reconciliation, accessibility, data retention, change notices, and migration support. A provider’s API documentation should explain unhappy paths as clearly as the successful application.

Commercial fit. Identify what triggers compensation, how renewals are treated, whether clawbacks apply, and how the relationship changes if a merchant switches processors. Confirm data-use rights, permitted cross-selling, exclusivity, termination, and any remaining financial exposure.

Merchant experience is a commercial concern as well. In the 2025 Federal Reserve survey, 60% of borrowers at online lenders said actual borrowing costs were higher than expected. That finding concerns online lenders broadly, not embedded lending specifically. It is a reason to make costs and terms clear before acceptance. Federal Reserve report, borrowing-experience findings.

Measure merchant growth and retention properly

Start by separating the funnel: eligible businesses, businesses shown an offer, applications, decisions, acceptances, and actual fundings. Track first-time funding separately from repeat financing. A merchant may see several offers or hold several processor IDs; neither should inflate the count of businesses served.

Use defined cohorts and consistent observation windows. These are recommended measures, not reported Mentom results:

A funded merchant may already have been growing. It may have been selected precisely because its sales were strong. A before-and-after increase therefore does not prove that financing caused the increase.

Compare similar businesses by pre-funding volume, trend, tenure, industry, geography, and seasonality. Where practical, use a phased rollout with a comparable eligible group and test whether trends were already different. Recognize that matching cannot remove every source of selection bias.

Keep merchant closures and lost processing relationships in the cohort; excluding them makes performance look healthier than it is. Also examine what happens after financing is repaid. That helps distinguish continuing product value from behavior during a repayment obligation.

Measure complaints, time to resolve an issue, returned disbursements, repayment exceptions, and repeat-financing patterns alongside the growth measures. Repeated borrowing may indicate successful reinvestment or persistent stress; it is not inherently a success metric.

Percentages need the same discipline as dollar figures. Preserve the denominator, period, cohort, and measurement method. A striking percentage from a very small group is not a sound public claim.

Where to start, and how Mentom can help

Start with one merchant segment and a clear use case. Establish whether the obstacle is access to financing, application friction, product mismatch, or lack of awareness. Then select a partner and integration path that address that obstacle.

A practical first release includes agreed merchant eligibility, a clear application entry point, accurate disclosure of the financing provider, reliable status reporting, a servicing handoff, and a way to evaluate the merchant experience. Broaden the rollout when the actual results justify it.

Mentom’s role begins with the payments operation around the merchant: integrated payment experiences, onboarding and activation, developer support, and the acquiring relationship. We can help map how a financing experience should connect to those workflows and identify the questions a funding partner must answer. The scope of any lending integration and program remains subject to the selected provider and agreement.

For ISO and agent partners, the goal is a merchant relationship with more practical value. For software companies, it is a product that helps customers do more of the work of running their businesses in one place.

Frequently asked questions

Does offering embedded lending make an ISV a lender?

It does not necessarily do so. A distribution model can use a separate financing provider. The actual activities, agreements, and applicable requirements determine the platform’s responsibilities.

Can the acquirer avoid funding loans and making approval decisions?

Yes, that is the model to establish with the financing partner. Confirm that funding, credit decisions, servicing, and borrower default exposure sit with the intended parties. Review exceptions and continuing obligations in the contract.

Can an ISV offer financing without rebuilding its application?

A hosted or provider-component approach may limit the initial development work. Merchant identity, authorization, data permissions, status handling, and support ownership still need to be designed.

How much must a merchant process to qualify?

There is no universal figure. Providers assess different products, data sources, and merchant profiles. Ask for the applicable criteria, and distinguish business revenue from the volume visible through a particular processor.

Which MCCs are most likely to be approved?

There is no defensible universal ranking in the sources reviewed here. An MCC can affect program eligibility, but approval also depends on the business and the funding partner’s underwriting.

Is embedded financing always cheaper or more flexible than a bank loan?

No. The embedded experience may reduce application friction. Cost and flexibility depend on the financing agreement, and a merchant should compare suitable alternatives.

Does embedded lending guarantee more transactions or better retention?

No. Those are potential benefits to evaluate with defined cohorts and merchant outcomes. The strongest program combines useful financing, clear terms, dependable support, and a payments relationship the merchant wants to keep.

Sources and references

Research current through September 9, 2026. Survey dates, populations, and product definitions matter; the sources below do not all describe the same borrowers. The workflow, evaluation framework, and Dave’s Take passages are operator analysis, not financing guarantees or measured Mentom portfolio results.

1. Federal Reserve Banks. 2026 Report on Employer Firms: Findings from the 2025 Small Business Credit Survey. March 3, 2026. Includes the report’s published findings.
2. Federal Reserve Banks. 2026 Chartbook on Firms by Industry. April 2, 2026; pages 30 and 36.
3. Federal Reserve Banks. 2026 Chartbook on Firms by Revenue Size. April 2, 2026; page 37.
4. Federal Reserve Banks. 2026 Chartbook on Rural and Urban Firms. April 2, 2026; pages 30 and 37.
5. PYMNTS Intelligence; commissioned by Visa. How Embedded Lending Can Boost Growth and Stability for Small Businesses. July 2024; figures 3 and 9, methodology.
6. CGAP. The Promise of Fintech for Micro and Small Enterprises. 2022; embedded-finance model discussion.
7. Bank for International Settlements. Big tech in finance: opportunities and risks. Annual Economic Report, June 30, 2019; platform data and credit models.
8. Federal Reserve Board. Small Business Credit: How Entrepreneurs Finance the American Dream. March 13, 2025; financing structures and cost comparisons.
9. U.S. Small Business Administration. 7(a) loans. Program guidance accessed September 9, 2026.
10. Visa. Merchant Data Standards Manual. April 2026, public edition; classification guidance and MCC entries.
11. YouLend. Introduction to YouLend: integration options, Lead & Loan States, and Verifying Webhook Requests. Official technical documentation accessed September 9, 2026; implementation examples only.
12. OWASP. API1:2023 Broken Object Level Authorization. API Security Top 10, 2023 edition.
13. New York State Department of Financial Services. 23 NYCRR Part 600: commercial-financing disclosures. Adopted February 1, 2023; jurisdiction-specific example.
14. Federal Reserve Banks. Small Business Credit Survey terminology and definitions. Definitions of lender types, industry groups, and observation periods.

About the author

Dave Wilson is Chief Operating Officer of Mentom Payments. His perspective connects payments technology with merchant onboarding, risk, support, and the work required to operate an acquiring relationship.

Related reading

• Agent vs. ISO: What It Really Takes to Build and Scale a Payments Business
• Visa VAMP: the merchant and acquiring operating guide
• Integrated payments for software platforms