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Convenience has now become table stakes. 

In the past few years, especially since the onset of COVID, we’ve come to expect that what we need can be dropped on our doorstep with the click of a button. Those expectations go beyond our personal lives and carry over into how we run businesses, which is why embedded financing is growing so fast. 

For independent software vendors (ISVs), offering capital to their customers can be a powerful step up in the relationship. Putting capital in their hands when they need it helps ensure SMBs stay healthy and operating, and giving them access to that capital through your software platform increases stickiness and loyalty by letting them get everything they need in one place.

Small business owners want quick access to capital where they already spend time, in the software they use to run their business day to day. Add to that increasingly difficult access to traditional financing, and there’s an enormous opportunity for software companies. But in addition to the opportunity, it also presents a big challenge.

The challenge of building embedded capital 

To put it simply, building a capital product is incredibly hard. There are a lot of moving parts and hurdles you have to clear to make it sustainable. When you really break it down, there are five crucial requirements:

The trouble is, access to capital hinges on the successful execution of the previous four requirements. The increasing verticalization of software gives an advantage in two of these areas, but can software companies overcome the others? 

And when it comes to building in-house, should they even try?

The verticalization of payments and industry-specific software 

The verticalization of payments has been an ongoing trend, with comprehensive software tools that help business owners manage their operations seamlessly. This trend will only continue, leading to more end-to-end operating systems that simplify business management and payment processing. A prime example is Toast, a widely recognized platform that helps restaurateurs oversee just about everything.

Industry-specific software holds unique, accurate, real-time transaction data, which can be a solid foundation for a capital offering. It also provides a steady funnel of new customers, already engaged with the software and using it regularly. However, while vertical software can address the first two requirements of low CAC and consistent data, it falls short in underwriting expertise, operational efficiency, which limits access to external capital. 

These are formidable challenges that even many pure-play lenders struggle with, especially during tough economic cycles. Having had the opportunity to play a significant role in the growth of both QuickBooks Capital and Square Banking, I can say two things for sure: these are high hurdles to jump, even for companies with massive resources available to them, and they’re the kind of problems that Fintech was born to solve.

Integrating financial services within industry-specific software can provide a ton of value to business owners. But the greatest strength of these software companies lies in their specialization. They intensely focus on and understand their industry, and building a capital product in-house distracts from that focus in a way that would be catastrophic. The solution is to partner with someone whose strong suit is connecting businesses to capital through technology. 

Fintech has a significant role to play in making financing more accessible to small business owners, and embedded financial services make perfect sense. With domain expertise across finance and technology, the right Fintech partner can automate the underwriting process, getting accurate results from live data with as little as 3-6 months of history, whereas banks traditionally need two years of audited financials and tax returns. 

Along with operating efficiency and tech-driven underwriting, they can also build compliance and regulatory tools into their embedded offerings, creating a turnkey solution. This allows software companies to leverage their deep industry knowledge and data through an embedded solution as simple as an off-the-shelf product.   

At Pipe, we’ve built an embedded product, 

, that does exactly that. Vertical SaaS companies and payment processors can deliver a fast, frictionless capital experience to their customers, with a native look and feel, without building anything from scratch. Multiple integration options let them decide exactly how hands-on they want to be with the process, based on resources and priorities, and they can launch capital to their customers in as little as a few weeks. 

The rise of embedded finance presents an exciting opportunity for software companies to expand their offerings and empower small businesses. However, it's crucial to recognize the challenges inherent in building a sustainable capital product. Careful consideration, expertise, and strategic partnerships are essential for success in embedded finance. Vertical software solutions and Fintech can work together to create massive value and give small businesses a new level of financial access.

Building a capital product is no small task. Here are three reasons most software companies shouldn't even try.

Building an embedded capital product is no small task. Here are three reasons most software companies shouldn't even try.

Here's why most software companies shouldn’t build an embedded capital product. 

Here's why most software companies shouldn’t build a capital product. 

Most software companies shouldn’t build a capital product. Here's why:

The business world is no stranger to buzzwords, but embedded finance is more than a fleeting trend. It represents a profound shift in how software companies deliver value and generate revenue. By seamlessly integrating financial services like payments, lending, and payroll into their platforms, software companies can transform themselves into indispensable tools for their customers.

While embedded finance is growing rapidly, this article, like the growth trend itself, isn’t really about embedded finance; it’s about the software companies that will use it to take themselves to the next level, hitting their financial targets while serving their customers even better. It’s also about those customers, who gain the ability to do more of what they need in one place, as financial tools and capital access become an integral part of the software they use to run operations. 

Let’s look closer at launching embedded finance in 2025, how it can benefit you and your customers, and a few key strategies to make it a successful part of your roadmap and get a headstart on your revenue and EBITDA goals without stretching yourself thin.

What is Embedded Finance?: The Basics for Software Companies

embedded finance integrates financial services

—such as payments, lending, and payroll—directly into software platforms. This simplifies workflows, removes barriers, and meets customers right where they are so they can focus on operations.

For small and mid-sized businesses, this is a game-changer. Embedded finance eliminates the need to juggle multiple tools or visit external platforms to access critical financial services. Whether it’s securing funding, managing payroll, or streamlining payments, business owners can accomplish more within the software they already use every day. 

Ultimately, embedded finance bridges the gap between what SMBs need and what traditional financial services have offered. This evolution reflects a broader trend: software platforms no longer serve as standalone tools but as holistic ecosystems that solve multiple problems in one place. Success lies in aligning customer needs with seamless, integrated solutions.

The momentum around embedded finance has already begun, but 2025 will be the tipping point for software companies looking to leverage it for sustainable growth. Why? 

First, the software industry itself is experiencing significant evolution. As 

business owners continue to demand more from the platforms they use

, the need for all-in-one solutions is becoming non-negotiable. Companies that don’t meet this demand risk losing market share to competitors that can offer the financial capabilities their customers need. Embedded finance is no longer a luxury—it’s becoming a necessity.

businesses are struggling to access capital through traditional means

. The barriers posed by outdated lending systems, long approval processes, and limited access to credit are becoming increasingly apparent. As SMBs look for faster, more flexible solutions, software companies that embed financial services directly into their platforms will have a massive competitive edge. They‘ll not only provide more value but will also drive increased customer loyalty by meeting their customers’ needs in real-time.

Finally, the technology and infrastructure to support embedded finance are now more accessible than ever. Fintech solutions that integrate seamlessly with software platforms are maturing, offering easy-to-deploy tools that require little technical overhead. With the right partner, software companies can introduce embedded finance into their product offering quickly and efficiently, with minimal risk.

By embedding financial services, software companies can drive growth, meet market demand, and position themselves for long-term success. Those who wait will risk falling behind as competitors capitalize on the opportunity.

Key Benefits of Embedded Finance for Software Companies

Embedded finance can help software companies grow in several ways. Let’s explore how it can directly impact your revenue and EBITDA goals:

One of the most immediate benefits of embedded finance is the potential to unlock new revenue streams. By integrating financial services like capital directly into your platform, you can create a steady and recurring source of income. By partnering with a Fintech offering, you can launch with little to no engineering resources and can drive this revenue with minimal marketing budget.

2. Increased Customer Retention and Loyalty

When platforms integrate financial services, they tend to become more "sticky"—meaning customers are more likely to stay loyal to the platform because their operational needs (including financial management) are being met in one place. This reduces churn and increases customer lifetime value, as your platform becomes more essential to their business. Customers no longer need to switch between multiple tools and platforms to handle their business operations; they can do everything within your ecosystem, which enhances their overall experience and loyalty.

This stickiness also protects you against the roadmap of competitors. For example, if your customers process payments through your platform and you add an embedded capital offering, you protect yourself from the chance that the external capital provider they 

have used decides to launch a payment product of their own. 

One powerful aspect of embedded finance is that it’s fueled by your customers’ live data. Capital offers, for example, can be underwritten based on transaction history, eliminating much of the manual data collection that makes traditional loan applications so long. It can also provide access to data insights you previously didn’t have access to. 

For example, you may be limited to transaction data from processing customer payments. An embedded offering could provide insights into your share of wallet by comparing the revenue you process with your customer’s total revenue, or spend insights based on an embedded card. This data-driven approach strengthens customer relationships and opens up new opportunities for cross-selling and upselling. 

As more competitors adopt embedded finance, software companies that don't act will find themselves at a disadvantage. The ability to offer integrated financial services will become a key differentiator, especially for businesses in vertical markets. By offering this added value, you can position your platform as the go-to solution for customers in your niche, creating a significant competitive edge. 

Building a financial product in-house can take 6-12 months or longer, taking you away from your core focus. The right Fintech partner can help software companies scale embedded finance quickly and with minimal technical overhead. By leveraging pre-built solutions and APIs, you can embed financial services into your platform without investing significant resources into product development. Your partner can also help you expand the offering into new markets without starting from scratch, helping you maintain momentum as you grow.

In addition to increased LTV and the direct revenue potential of an embedded financial product, it’s also a powerful way to help your customers grow their own businesses and stay healthy. With access to financial services like working capital, your SMB customers can invest in their growth and their people, leading to increased GPV and LTV for your business and reduced churn from customers going out of business. 

In-House Development vs. Partnering with a Fintech: What’s Right for Your Business?

When deciding to launch embedded finance, one of the first decisions software companies face is whether to 

build the product in-house or partner with a Fintech provider

. Both approaches have their pros and cons, and the choice largely depends on your company’s resources, goals, and timeline.

Building an embedded finance solution internally gives you full control over the product, from design and functionality to customer experience. You can customize the offering to your exact specifications, ensuring it aligns perfectly with your platform and meets your customers’ unique needs. It also allows you to keep all revenue in-house and retain complete ownership of the technology.

However, building an embedded finance product in-house comes with significant challenges. First, it requires substantial technical expertise and a dedicated team, including engineering, product, risk, compliance, capital markets, GTM, and more. This can be resource-intensive and may divert focus from your core business operations. The development process can also take 6-12 months or longer, delaying your ability to capitalize on the embedded finance opportunity.

In addition, you’ll need to manage regulatory compliance, data security, and ongoing maintenance, which can become costly and complex. While you have control over every aspect of the product, the risk of failure is also higher without the experience of a Fintech partner.

2. Partnering with a Fintech: The Pros and Cons

Partnering with a Fintech provider like Pipe offers a faster, more efficient way to launch embedded finance. With ready-to-integrate solutions, you can get up and running quickly—often in a matter of weeks, not months. This approach dramatically reduces or even eliminates the need for in-house development and minimizes technical overhead.

A good Fintech partner brings industry expertise, robust infrastructure, and regulatory compliance to the table. They’ve already solved many of the challenges you’d face when building an embedded finance product, from underwriting to fraud detection. 

The downside is that you may have less flexibility and control over the product. However, Pipe offers a range of integration options and a fully themeable product experience that not only allows you to customize a product that feels native to your platform, but also gives you the time and focus to stay agile with your core offerings. 

The decision ultimately depends on your company’s priorities. If you have the internal resources, technical expertise, and time to build the product while maintaining full control, in-house development could be the best route. However, if you’re looking to launch quickly, minimize risk, and leverage existing Fintech expertise, working with a partner like Pipe can help you reach your goals faster and achieve better results.

Choosing the Right Fintech Partner for Embedded Finance

If you choose to go the partnership route, you’ll want to choose an embedded partner that not only brings the technical expertise and infrastructure to the table but also aligns with your business goals and understands your customer base. Here's how to choose the right fintech partner for your embedded finance strategy:

A key benefit of embedded finance is seamless integration. The Fintech partner you choose should offer pre-built solutions, APIs, or SDKs that easily integrate into your platform. This minimizes the amount of time and resources required to bring the financial services to market, reducing the technical burden on your team.

Pipe offers three integration options, from a hosted pilot to a fully-embedded API solution, giving you the perfect fit, whether your focus is a quick launch or a customizable user journey. You should also consider scalability—ensure that your partner’s solution can grow alongside your business, handling increases in transaction volume and expanding to new regions as you scale.

Financial services require robust risk management and compliance programs. When choosing a Fintech partner, ensure they have strong security measures in place and can meet the regulatory requirements of your target market. This includes not only data protection (such as GDPR or CCPA compliance) but also industry-specific regulations for financing payments, etc..

Consider the expertise of the team you partner with, as well as the technology they have in place to aid in risk management, fraud detection, and compliance in a scalable way. 

Embedded finance isn’t just about technology—it’s about the customer experience. Choose a Fintech partner that prioritizes delivering a seamless and intuitive user experience. The financial products should feel as integrated and natural as the rest of your platform, with no friction for customers in accessing or using them.

, helping you troubleshoot issues, optimize your capital offering, and ensure a smooth experience for your users. This level of partnership will enhance your ability to deliver high-quality service for your customers and outstanding metrics for you.

Predictions for Embedded Finance in 2025 and Beyond

As we look ahead to 2025, the direction of embedded finance points to rapid adoption and innovation. Software companies that integrate financial services will become leaders in their verticals, reshaping customer expectations and competitive dynamics. Here are some predictions for what’s next:

1. Embedded Finance Will Become the Industry Standard

Soon, embedded finance will no longer be a differentiator; it will be a baseline expectation for software platforms. Businesses of all sizes will seek out platforms that offer integrated financial services as part of a holistic, all-in-one solution. Software companies that don’t adapt risk being left behind as customers flock to platforms that offer greater convenience and value.

2. Vertical-Specific Solutions Will Dominate

The rise of industry-specific platforms, such as Toast for restaurants or ServiceTitan for contractors, will fuel the growth of tailored embedded finance solutions. These platforms will continue to evolve into comprehensive operating systems, seamlessly integrating payments, lending, payroll, and other financial tools to address the unique needs of their industries.

3. AI-Driven Financial Insights Will Transform SMB Decision-Making

With the power of artificial intelligence and live data, embedded finance will go beyond offering financial services to providing actionable insights. For example, predictive analytics will help SMBs anticipate cash flow challenges or identify growth opportunities, further embedding these platforms into the decision-making processes of their customers.

As embedded finance grows, regulatory oversight will increase. Software companies will need to navigate evolving compliance requirements, but this challenge will also drive innovation in risk management, fraud prevention, and secure financial integration. Those working with experienced partners will be at a huge advantage, with an expert managing the complexity on their behalf.

5. Partnerships Will Power the Next Wave of Innovation

The software marketplace will continue to emphasize collaboration. Partnerships between software platforms and Fintech providers will accelerate the development of embedded solutions, making it easier than ever for SMBs to access capital, manage payments, and scale their operations.

Conclusion: Seizing the Embedded Finance Opportunity

The rise of embedded finance is more than a trend; it’s a transformative opportunity for software companies. By integrating financial services into their platforms, businesses can unlock new revenue streams, enhance customer retention, and position themselves as indispensable tools in their customers' operations.

Whether you choose to build in-house or work with a Fintech partner like Pipe, the time to act is now. 2025 is poised to be a pivotal year for embedded finance, and those who embrace the opportunity will gain a competitive edge that defines the next chapter of their growth.

Embedded finance isn’t just about technology—it’s about creating a seamless, value-driven experience for your customers. By aligning your strategy with customer needs, industry trends, and the right partnerships, you can build a future-ready platform that stands out in a rapidly evolving market.

2025 could set the perfect conditions for vertical software companies to grow with embedded finance. Here's why...

See why 2025 could be a watershed year for vertical software companies and why embedded finance could be the catalyst.

Will 2025 be the year of embedded finance for software companies?

Pipe's cash advance model creates several advantages for SMBs, including simplicity, flexibility, and speed. Here’s a closer look at Pipe Capital, how it differs from traditional MCAs, and what it means for business owners and embedded partners.

Our cash advance structure allows for agility and speed, launching faster than a typical traditional loan product. Pipe Capital is built with speed and convenience in mind for both our embedded partners and the small businesses that access capital through their platforms.

One of the major hurdles in traditional small business financing is the lengthy applications and extended waiting periods. Because Pipe Capital underwrites SMBs based on secure, live transaction data, we can streamline the process down to a few simple steps, utilizing data that already exists on the partner platform. The result? Partners can launch in as little as a few weeks, and business owners can access capital in days. 

Merchant-friendly funding for safer growth

We believe companies in the financial industry have an obligation to build proactive policies into their products and protect their customers, whether it’s legally mandated or not. While we’re not a lender, Pipe Capital complies with federal fair lending laws, state disclosure laws, and the full KYB/sanctions regime. Our program maintains robust protection for SMBs, helping our partners deliver high customer satisfaction. This also allows us to keep the cost of capital down, by minimizing risks, making the program more attractive to our capital markets partners. 

In the past, many small business owners have put their business 

 assets at risk, in an effort to secure the funding they needed to grow. At Pipe, we never require personal guarantees from business owners and do not have “confessions of judgment” and other abusive contractual terms some have used to seize assets or freeze accounts with little recourse for the business owner. 

We also work to protect against dangers like stacking by issuing only one advance at a time and monitoring for outstanding financing from another provider at onboarding. Our goal is always to help SMBs access the capital they need, as quickly and sustainably as possible.  

Payments that flex with changes in revenue 

Some MCA providers have given the product a bad name in the past by taking advantage of the flexible MCA payment schedule, with accelerated payments for any contract infraction, which resulted in effective APRs in the hundreds. This is why we’ve worked hard to prevent excessive APRs and have built a product that goes out of its way to help preserve the customers’ cash flow. 

Pipe Capital payments decrease with dips in revenue, with no monthly minimum, protecting SMBs during slow times. With one flat, transparent fee (paid over the life of the advance) there are no surprises, and our hold rates (the portion of the customer’s revenue held back to pay their MCA) are lower than many alternatives—15% or below—preserving cash flow for businesses.  

A cash advance product that equals more capital access

Small business owners and the software companies that serve them often compare the benefits of cash advance products with traditional loans. While there are pros and cons to both, our advance structure makes it possible to give capital access to more SMBs when they need it. 

The primary advantage of traditional term loans is that they can be less expensive overall, often because they’re securitized and offered only to the lowest-risk population of prospective borrowers. Unfortunately, many factors can place immigrant-, minority-, and women-owned businesses in the “higher-risk” categories, locking them out of the financial access they need to grow their businesses to their full potential. 

For example, Black-owned businesses were denied loans nearly twice as often as white business owners, according to  Federal Reserve statistics.

 Women-owned businesses also have a harder time being approved for loans, even when their businesses are comparable to their male-owned counterparts.

Unlike traditional financing options based primarily on credit scores and lengthy business histories—which often disproportionately exclude these underserved populations—Pipe’s Capital advance is based on anonymized live revenue data, giving a real-time picture of the health of a business with as little as 3-6 months of history. This allows smaller and younger businesses—many of which are women-, minority-, and immigrant-owned—better access to working capital.

Pipe is underwriting the future of small business with an evolved cash advance model that allows simple,  unbiased financial access to be seamlessly integrated into the tools SMBs use every day. 

https://www.commerce.gov/news/fact-sheets/2024/06/fact-sheet-us-department-commerce-support-minority-business-enterprises

https://www.federalreserve.gov/publications/2021-november-consumer-community-context.htm

See how Pipe's evolved cash advance model is creating more capital access for small business owners across industries.

See how Pipe's evolved MCA model is creating more capital access for businesses across industries.

Pipe Capital: A merchant-friendly MCA model built to improve capital access for SMBs

Pipe Capital: A merchant-friendly cash advance model built to improve capital access for SMBs

Pipe Capital: A customer-friendly MCA model built to improve capital access for SMBs

Helping self-care businesses take care of themselves

Co-founders Matt Danna and Sean Stavropoulos started 

 as an appointment scheduling tool for salons, and it’s grown into a complete client experience platform, including scheduling, business management, automated email marketing, and reliable payment processing used by over 3,500 self-care businesses. Fueled by a deep understanding of the day-to-day needs of barbershop, salon, spa, and medspa owners, they identified one of the biggest gaps in the industry: access to working capital.

“For years, the self-care industry has been underserved by lenders who understand little to nothing about how these unique businesses work. Traditional small business loans have only been accessible to business owners who don't actually need them. It’s also no secret that the women- and minority-owned businesses that make up a significant portion of the self-care industry have long struggled to access the loans and lines of credit on which small businesses depend, ” said Matt Danna.

To help close this capital gap, they launched 

, powered by Pipe. Boulevard Capital lets self-care business owners access the capital they deserve based on what they’ve built. 

For Boulevard users, accessing capital has never been simpler. Pipe’s streamlined process allows them to get pre-approved based on their Boulevard transaction data, so they can access the capital they need without credit checks or lengthy financial histories. This approach not only democratizes access to capital but also aligns payment with the merchant's sales cycles, so they’re never stuck with a high fixed payment during a slow period.

By partnering with Pipe, Boulevard gives the self-care industry:

Expanding opportunities: launch capital in 

Boulevard is a great example of how vertically focused Payfacs and ISVs can bring capital access to industries that need it most. Pipe’s mission is to expand access to unbiased capital for SMBs. No one knows SMBs better than the vendors that serve them, and there’s no better place for them to access capital than the platforms they use to run their businesses every day. Pipe’s infrastructure is designed to embed seamlessly, offering capital access to your merchants with just a few clicks, all while feeling native to your platform.

Embedded capital solves the biggest problems SMBs face in almost any industry; access to working capital. Ready to unlock growth for your merchants, while also growing your GPV and increasing user loyalty? Schedule a demo with us today. 

Co-founders Matt Danna and Sean Stavropoulos started Boulevard as an appointment scheduling tool for salons.

Boulevard Capital Unbiased access for an underserved industry

Boulevard Capital: Unbiased access for an underserved industry

Priority is a leading payments and banking solutions provider that helps businesses take and make payments and monetize payment networks.

They’re on a mission to simplify how businesses handle their finances. They also recognize how critical capital access is to the health and survival of small businesses. “We call it unified commerce, where payments, banking, and payables are all connected on a single platform. A big part of that is giving businesses access to capital when they need it,” said Thomas Priore, Chairman and CEO of Priority.

To make that quick, flexible capital access a reality, they launched Priority Capital, powered by Pipe. After a successful pilot test, Priority implemented a full embedded UI integration within 7 days to power Priority Capital inside their payments ecosystem. This integration offers Priority businesses a straightforward, user-friendly path to obtaining the capital they need to grow, without the hassle of credit checks, high rates, or opaque terms.

“Our mission is to change how any size company manages their money, and offering our customers access to funding through Pipe is a seamless and powerful extension of that mission that will change how they conduct business. I am excited to work with Pipe to unlock growth for every entrepreneur who wants to build a great business," said Priore.

For businesses that use Priority, accessing capital has never been simpler. Pipe’s streamlined process allows merchants to get pre-approved based on their Priority transaction data, enabling them to request and receive funding in just a few steps directly through the MX™ Merchant dashboard. This approach not only democratizes access to capital but also aligns payment with the merchant's sales cycles, providing a truly flexible funding solution.

Priority businesses can now benefit from:

Expanding opportunities: launch your own capital offering

Pipe's vision extends beyond our collaboration with Priority. We're on a mission to empower platforms and their merchants with embedded capital solutions that are as flexible as they are accessible. Our infrastructure is designed to meet you where you are, offering seamless capital access to your merchants with just a few clicks, all while feeling native to your platform.

For platforms looking to enhance their offerings and for businesses in search of growth capital, the partnership between Pipe and Priority serves as a model for what's possible when technology and finance converge to support SMBs. Ready to unlock growth for your business through flexible funding? Schedule a demo with us today. 

With Pipe's embedded solution, Priority Capital is bringing simplified capital access to Priority merchants.

Pipe & Priority: Pioneering a New Frontier in Business Funding

Pipe & Priority: Pioneering a new frontier in business funding

Pipe and Priority partnering to empower businesses with flexible funding

Business owners frequently find themselves in need of fast and accessible financing. Whether it's restocking inventory, launching a marketing campaign, or investing in cost-saving equipment, it’s often essential to access capital outside of your regular cash flow.

However, getting funds through traditional means like 

 can be a slow and challenging process. This is where a merchant cash advance comes to the rescue. Think of it as a fast way to refuel your business without the long waits that often come with traditional small business loans.

In this article, we'll dive into what a merchant cash advance is, its benefits for businesses, how it compares to traditional loans, and how to decide if it's the right choice for your business. (

For a closer look at Pipe's unique approach to MCAs, head here.

Understanding the basics of a merchant cash advance

A merchant cash advance is a financial arrangement that provides businesses with a 

 in exchange for a predetermined percentage of their future sales.

Unlike traditional loans, payments on an MCA are flexible and directly tied to daily sales, making them suitable for businesses with fluctuating revenue. This alternative funding option is designed to offer quick and flexible access to capital, particularly for businesses that may face challenges qualifying for traditional bank loans.

Here's a breakdown of how a merchant cash advance works:

This continues until the advance and any associated fees are fully repaid. Usually, this lasts anywhere from 3 to 18 months. This flexibility can be particularly beneficial for businesses with fluctuating sales volumes, as their payments will align with their revenue stream.

Funders determine rates for merchant cash advances (MCAs) based on various factors, and the process can vary from one funder to another. Here's a simplified overview of how funders might determine their rates:

The size of the advance can also affect rates. Larger advances may come with lower rates because they generate more revenue for the funder.

The rate is typically expressed as a decimal or percentage, and it represents the total amount to be paid back. To understand the cost of an MCA, multiply the factor rate by the advance amount. For example, if you receive a $50,000 MCA with a factor rate of 1.3, you'll pay a total of $65,000.

The benefits of a merchant cash advance for your business

A merchant cash advance provides several distinct advantages for businesses, particularly when compared to traditional bank loans.

One of the primary advantages of a merchant cash advance is the speed at which businesses can access the funds they need.

MCA funders understand the urgency of business needs, and they often deliver funds in a remarkably short time frame. Think hours or days, not weeks or months. Traditional bank loans, on the other hand, often involve a lengthy and cumbersome application process, with paperwork, credit checks, and extensive reviews that can drag on for ages.

In contrast, applying for a merchant cash advance is relatively quick and straightforward, with many funders offering online application processes.

With MCA's quick access to capital, businesses can take advantage of growth opportunities as they arise.  If you own a retail business, for instance, and you suddenly experience a surge in demand for your products, your business can quickly acquire additional inventory to meet the increased demand, ensuring that you don’t miss out on potential sales.

Moreover, immediate access to capital can also help businesses navigate unexpected expenses or emergencies.  Life in business is full of surprises, and not all of them are pleasant. When unexpected expenses crop up, an MCA can be a lifesaver.

Whether it's repairing a crucial piece of equipment or covering unexpected bills, having quick access to funds can prevent disruptions to daily operations and maintain business continuity.

Another significant benefit of opting for a Merchant Cash Advance is the flexibility it brings to the table when it comes to payment. Instead of locking you into a set monthly amount, MCA connects payments to a percentage of your daily sales. 

This setup allows businesses to navigate periods of lower revenue without the added burden of fixed monthly installments, helping them effectively manage their cash flow. 

This flexibility is invaluable, especially during challenging times like seasonal downturns or economic uncertainties. In such situations, businesses may experience temporary declines in sales. Flexible payment provides breathing room and allows companies to rebound without the heavy weight of inflexible payment schedules.

The adaptable payment terms also cater to businesses with fluctuating revenue patterns. For those facing peaks and valleys in their sales, a merchant cash advance provides access to capital without worrying about a fixed payment schedule putting a pinch on their cash flow.

Again, most traditional banks require you to provide collateral, such as real estate or valuable assets, as security for traditional loans. Of course, this bar often poses a significant barrier for businesses that lack substantial assets to pledge.

merchant cash advance is typically unsecured

. This means that it eliminates the need for businesses to provide collateral, because the capital is funded based on your ability to pay the advance, and not on your assets. 

The absence of collateral makes it a viable funding option for a broader range of businesses, particularly startups and small businesses that might not possess the necessary assets to secure a traditional loan. 

Merchant cash advances typically don’t come with restrictions on how businesses can use the funds, so long as they’re used for business purposes. This flexibility allows businesses to allocate the capital where it's needed most, whether for inventory replenishment, marketing initiatives, equipment upgrades, expansion plans, or any other operational requirements. This freedom in fund utilization supports businesses in pursuing their specific growth strategies.

Merchant cash advances often have higher approval rates compared to traditional loans. The evaluation process often focuses on a business's daily credit card sales and less on credit history, making it a viable option for businesses with less-than-perfect credit or shorter operating histories.

Comparing merchant cash advances with traditional business loans

Merchant cash advances and traditional business loans are two distinct financing options available to businesses. Each has its own characteristics, advantages, and drawbacks. Here's a comparative analysis to help you make an informed choice between the two:

Is a Merchant Cash Advance Right for Your Business?

 You may be tempted to ask which financing method works best. 

As you may have noticed, there’s no one-size-fits-all answer. When deciding between an MCA and a traditional loan, think about your business's specific needs, financial situation, and long-term goals.

Should you get a merchant cash advance for your business?

Now that you know about merchant cash advances and their benefits, it's important to decide if it's 

 for your business. Here are two main things to think about:

By thinking carefully about these two factors, you can make an informed decision about whether a merchant cash advance is the right fit for your business.

Typical merchant cash advances come with all the pros and cons we’ve just talked about. A revenue advance from Pipe is one of the most merchant-friendly options for accessing capital quickly and easily. Pipe advances are based purely on the health of the business, measured in real time with secure live data connections. This allows business owners to access the capital they deserve while staying focused on running the business, not on lengthy applications. 

You pay back your advance with a portion of daily revenue, so payments flex with your cash flow. 

To find out if Pipe’s fast, frictionless capital is right for you, you can 

Learn the ins and outs of merchant cash advances and how they can help small and medium-sized businesses better manage cash flow and grow.

Learn the ins and outs of merchant cash advances and how they can help small and medium-sized businesses better manage cash flow and grow on their terms.

What is a Merchant Cash Advance and How Can It Help SMBs?

What is a Merchant Cash Advance and How Can It Help Small and Medium Businesses?

For small businesses, access to capital is critical for growth and success. One option that small business owners are increasingly turning to for quick and nimble access to capital is a 

However, like any financial decision, there are pros and cons to consider before proceeding with this type of alternative funding. In this article, we’ll dive into merchant cash advances to help you determine if they’re the right choice for your business. (

To learn more about Pipe Capital's unique approach to MCAs, head over here

Understanding the merchant cash advance 

Before digging into the pros and cons, let's first understand what a merchant cash advance is. Simply put, it’s an alternative form of financing where an MCA company provides a lump sum payment to a business’s bank account in exchange for a percentage of its future credit and debit card sales.

Merchant cash advances have gained popularity among small businesses in recent years thanks to their flexibility and accessibility. Unlike traditional bank loans, which often require extensive paperwork, a lengthy approval process, and oftentimes collateral, not to mention years of operating history, MCAs offer a quicker and more streamlined funding solution.

Learn the ins and outs of merchant cash advances, the types of businesses that benefit most, and if an MCA is right for your capital needs.

Learn the ins and outs of merchant cash advances, the types of businesses that benefit most, and if an MCA is right for your working capital needs.

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