Embedded Lending Platforms: A New Era for Canadian Small Business Financing

The Canadian small business sector, which accounts for nearly half of private sector GDP, has long struggled with the slow, opaque, and often inaccessible financing options provided by traditional banks. Today, embedded lending platforms like Epos Now and Adyen's Capital are revolutionizing access to capital, offering fast, data-driven loans that bypass the inefficiencies of conventional banking. This shift isn't just a minor tweak—it's a tectonic shift in how small businesses secure growth capital, and investors should take note.

The Problem with Traditional Financing

Small businesses in Canada face a stark reality: 57% rely on short-term loans for equipment purchases, yet traditional banks take up to two weeks to disburse funds. The delay is crippling, and 19% resort to borrowing from friends or family as a stopgap. This frustration stems from outdated credit assessment models that prioritize collateral over cash flow and demand lengthy paperwork. For businesses in sectors like retail or hospitality—where margins are thin and inventory needs are urgent—the system is broken.

The Rise of Embedded Lending

Enter embedded lending platforms. These solutions, integrated directly into small businesses' existing financial ecosystems, are dismantling barriers to capital. Take Epos Now, a global POS provider that has expanded into Canada, offering loans within 48 hours through its Capital product. Repayments are tied to daily sales, eliminating guesswork. Meanwhile, Adyen's Capital platform, launched in Canada in 2025, leverages real-time payment data to assess creditworthiness instantly, offering transparent flat fees and instant approvals. The results are compelling: 80% of borrowers return for subsequent loans, signaling high customer loyalty.

Adyen's stock, which has surged alongside its fintech innovations, reflects investor confidence in its embedded lending model. The company's Canadian push is a strategic move to capture a market where only 28% of small businesses currently use platform-based financing—a figure ripe for growth.

Growth Drivers: Tech and Policy Synergy

The boom isn't accidental. It's fueled by three interconnected forces:
1. Digital Infrastructure: With 81% of Canadians using online banking, the foundation for digital lending is already in place. Cloud computing and real-time analytics enable platforms to assess creditworthiness using transactional data, not just credit scores.
2. Regulatory Support: Canada's open banking framework mandates data sharing between institutions, allowing lenders like Epos Now and Adyen to access the financial health of borrowers without manual intervention.
3. Untapped Demand: Over 97% of Canadian businesses are SMEs, and 52% are actively exploring online credit options. The market is vast, but underpenetrated.

The numbers back this up. The Canadian online lending market is projected to grow from $12.32 billion in 2024 to $34.76 billion by 2033, a 12.5% CAGR, while the digital lending segment alone could hit CAD $15 billion by 2028. This expansion isn't just about volume—it's about transforming how small businesses operate.

Where to Invest

The embedded lending boom presents clear investment opportunities, but not all players are created equal. Consider these avenues:
1. Pure-Play Fintechs: Adyen (NASDAQ: PAY) leads with its global scale and Canadian expansion. Worldline (Euronext: WRLN), the parent company of Epos Now, offers exposure to embedded finance through its POS and payment infrastructure.
2. Canadian Banks Partnering with Fintechs: Institutions like TD Bank (NYSE: TD) and Royal Bank of Canada (NYSE: RY) are integrating embedded lending tools into their SME offerings. Look for banks that prioritize API-driven partnerships over legacy systems.
3. ETFs and Sector Funds: ETFs like Fidelity MSCI Financials ETF (FINS) or the iShares Global Financials ETF (IXG) provide diversified exposure to financial innovators.

Investors should also monitor regulatory developments. Canada's open banking rules are a net positive, but U.S. tariffs and interest rate fluctuations could impact small businesses' ability to repay loans. Diversification and risk management are key.

The Bottom Line

Embedded lending is not a fad—it's the future of small business finance in Canada. Platforms like Epos Now and Adyen are rewriting the rules by marrying real-time data with instant capital access. For investors, this is a multiyear trend with clear winners. Look for companies that dominate payment ecosystems, benefit from regulatory tailwinds, and prioritize SME growth. The next wave of fintech adoption is here—and it's Canadian businesses leading the charge.