Another day, another embedded financing solution. GoDaddy has officially joined Square, Stripe, Shopify, PayPal, and Toast in offering working capital to their small business customers. If you’re keeping score, that means just about every major payments platform now has a “Capital” arm bolted on.
And honestly, it makes sense.
Why This Trend Makes Sense
For a payments company, adding a lending product is a no-brainer:
- Zero customer acquisition cost. They already have the relationship with millions of merchants. No sales calls, no digital ads, no broker middlemen. Funding is literally a dashboard pop-up.
- Data advantage. They see your sales in real time. They know whether you’re trending up, flat, or falling off a cliff — and they can underwrite you instantly without tax returns, bank statements, or credit pulls.
- Cash dominion. They control the payment rails, so repayment is just a skim off the top before the money ever hits your bank account. No chasing, no collections.
Compare that to the “pure play” online funders like OnDeck, BlueVine, or Credibly. They spend heavily to acquire each borrower — ads, affiliates, and yes, brokers. Payment processors don’t have that problem. They already own the point of sale.
Distribution beats product every time.
Why Brokers Should Sweat
This is yet another sign that brokers — who add nothing but markups — are on borrowed time. When Square or GoDaddy can approve you in minutes, what’s the point of paying some middleman a five-figure commission to “make an introduction”?
These embedded models cut brokers out of the picture entirely. That’s a good thing for small businesses.
But Here’s the Catch
There’s a darker side to this trend. Because payment processors have cash dominion, they don’t need to be as rigorous in underwriting. They can lend aggressively, knowing they’ll claw it back automatically with every swipe or tap.
That convenience makes it exceptionally easy to stack debt:
- A merchant could have Square Capital pulling 15% of daily card sales.
- Then add Stripe Capital taking another slice.
- Then Shopify skimming off e-commerce volume.
- Oh, and maybe a fintech loan or line of credit layered on top.
Individually, each deal feels painless. Collectively, it can choke a business’s cash flow to death.
This is where the industry is headed: embedded finance everywhere, stacking risk everywhere.
The Takeaway
Embedded financing is here to stay. It’s smart strategy for payments companies and, in many cases, a cheaper alternative to paying a broker’s markup. But the ease of access and lack of friction also means more small businesses will get in over their heads if they’re not careful.
Another day, another embedded financing solution. The opportunity is real — so are the risks.
Stay tuned — in a future post, I’ll dive deeper into how stacking in the embedded finance era could become the next crisis point for small business owners.