Small businesses are finding new funding pathways beyond traditional loans, with some lenders approving financing in hours by analyzing payment flows instead of credit scores.

Key takeaways

• Small businesses are looking beyond traditional bank lending to online and fintech solutions.
• Embedded finance uses AI and real-time data to tailor lending that adjusts with a company’s performance.
• U.S. tariffs have ushered in a wave of business for lending startups, with one firm reporting credit-line applications up 730% year-over-year in August.  

Small-business lending is being rebuilt for America’s 36 million plus entrepreneurs — and it’s happening inside the platforms they already use.¹ Companies like Square, PayPal, and Uber (in partnership with Pipe) are turning the tools that small businesses rely on every day into sources of capital, using real-time sales data to offer faster, more accessible funding.² At the same time, a new generation of fintech lenders — including Wayflyer, Clearco, and Slope — is leveraging transaction and e-commerce data to deliver loans in hours instead of weeks.

The shift is redefining how companies manage growth and cash flow, providing a modern alternative to traditional bank lending. The broader trend, known as embedded finance, is already proving how digital infrastructure can deliver capital faster when small businesses face disruption. Demand for short-term loans surged in August as import-heavy companies faced new tariffs on Chinese goods and growing uncertainty about supply costs. Slope reported that applications for its credit lines surged 730% year-over-year.³

Read more: How mega-retailers are turning tariffs into opportunity

Fintech moves faster

Industry estimates suggest fintech companies now generate 10–15% of small business loan volume — a small share of dollars but nearly double the number of borrowers served by traditional banks.⁴

Small businesses often need access to capital to grow and scale, but the criteria and processes traditional lenders use to determine creditworthiness sometimes prevents them from qualifying. Traditional lenders generally look at credit scores, years in business, and minimum monthly or annual revenue, which can favor companies with long track records and steady cash flow. Plus, securing funding through a bank often still requires in-person applications and manual document reviews, with approval processes that can take weeks because of conservative risk assessments and regulatory checks.⁵

Inside the new lending ecosystem

Instead of relying on credit scores and collateral, fintech lenders now track real-time sales data and how a business performs day-to-day. They can see a café’s morning surge in card swipes or an online retailer’s weekend sales spike and adjust credit offers automatically.⁶

With AI-driven data integration and real-time analytics, capital is becoming more responsive to how businesses operate, helping small-to-medium sized businesses (SMBs) find the capital solutions they need. The Federal Reserve Banks’ Small Business Credit Survey shows that while large and small banks remain the dominant financers, 24% of small businesses surveyed sought financing through an online lender in 2024. Expected odds of success, quick service, lack of collateral requirements, and denial by other lenders most commonly drove firms to apply at online lenders.⁷

Read more: 42% of Americans are willing to pay more when shopping local to support small businesses

From dashboards to deposits

Uber, in partnership with Pipe, now provides capital offers directly in its Uber Eats Manager app based on the restaurant’s sales history. Loans can be approved instantly, with funds arriving in the business bank account within 24 hours.⁸ Square provides custom loan offers ranging from $100-$350K based on business performance and deposits the cash the next business day after approval.⁹ Earlier this year, PayPal announced it had passed $30 billion in global loan originations for small businesses since launching its first merchant lending solution in 2013.¹⁰

Filling a critical gap for small businesses

Small businesses are considered the “backbone” of the U.S. economy and “the heart” of their communities.^11,12 They create jobs, stimulate local economies, add character to the neighborhood, and often provide financial support for local groups and organizations.

These firms make up more than 43% of the U.S. gross domestic product (GDP) and nearly 40% of private sector payroll.¹³ Between 2021 and 2024, businesses with under 250 employees accounted for nearly 53% of net job gains, according to the U.S. Bureau of Labor Statistics (BLS).¹⁴

Despite their impact, access to capital continues to be a critical challenge. Only 44% of SMBs currently have access to any form of external financing — whether through bank loans, lines of credit, or alternative lending.¹⁵

Of those SMBs who do have access to capital, 37% report they are highly interested in switching to providers that offer embedded lending options, highlighting how demand for faster, more flexible credit is reshaping the small business finance market.¹⁶