Tariffs, tight margins, and the tech lifeline for small businesses highlight why embedded lending offers speed, flexibility, and survival in volatile markets.
Tariffs are creating real-time liquidity crunches for small businesses (SMBs) that already operate on razor-thin margins. A recent PYMNTS study found that 20% of small businesses without financing fear they may not survive tariff-related cost increases, and 7% of all SMBs do not expect to last beyond two years.
In this economic climate, quick and reliable financing equals survival. The same study found that small businesses with access to funding are 23% more confident in navigating tariff shocks. For many, the difference between enduring disruption and shuttering altogether may come down to access to fast, flexible capital.
Traditional lending isn’t working for today’s SMBs
When costs rise unexpectedly, small businesses can often adjust their operations, however, this doesn’t always apply to their access to working capital. Tariffs, supply chain shocks and volatile input prices are hitting SMBs where it hurts: in their already-tight cash flow. Yet when these businesses turn to their banks or credit unions for help, they often find these institutions lack the infrastructure and capabilities to meet their financing needs.
Most traditional lending models are still anchored to manual processes, rigid underwriting and long approval timelines, while many simply can’t move fast enough to assist a small business owner whose expenses just spiked 15% overnight. Banks might require years of financial history, collateral or credit profiles that many newer or leaner businesses don’t have. Even well-established SMBs can get stuck in weeks-long cycles of paperwork and uncertainty, precisely when time is of the essence.
This isn’t due to a lack of support from financial institutions. Many genuinely want to help their small business customers, but they are stuck operating within legacy systems and risk frameworks that weren’t designed to address urgent, short-term disruptions. That disconnect leaves business owners to choose between delaying critical decisions, or turning to alternatives outside the banking system.
Embedded lending as a shock absorber
As tariffs and other external shocks continue to destabilize cash flow, small businesses increasingly need access to fast and flexible capital in real-time, without jumping through weeks of manual processing or trying to fit into outdated lending models. Embedded lending partnerships can be a financial shock absorber, smoothing over the volatility, buying business owners time to pivot or adapt, and keeping Main Street moving even when market hurdles arise.
Embedded lending allows financial institutions to offer small business financing directly within their own platforms, often white-labeled, without needing to build and manage the infrastructure themselves. From the business owner’s perspective, it feels like getting a loan or line of credit directly through their trusted bank or credit union, but behind the scenes, a fintech partner is powering the technology, decisioning, balance sheet and delivery.
For financial institutions, this model enables them to support their SMB customers with flexible capital solutions that don’t overextend their underwriting teams and avoid exposure to unfamiliar risks. Built on modern APIs and data integrations, embedded lending can be fast, adaptive and far more aligned with the way SMBs operate, which proves invaluable during economic shocks like tariff hikes, rising input costs or supply chain disruptions.
For small business owners, this speed and simplicity significantly enhances their ability to operate and grow in ways that weren’t previously accessible. When an invoice goes unpaid or inventory costs suddenly spike, they don’t have the luxury of waiting weeks for a decision. Embedded lending gives them the ability to cover short-term cash flow shortfalls, seize time-sensitive opportunities or keep operations running during external disruptions – all through the very same institutions they already know and trust.
Moving fast when your customers need you most
Community banks and credit unions are feeling mounting pressure to better serve small businesses with digital-first, fast-turn financial solutions. Meanwhile, SMBs are facing rising costs and softening demand, with many looking to their primary financial institutions for stability and support. But the truth is, most traditional lenders aren’t built to deliver capital at the speed or flexibility these businesses need.
When financial institutions partner with fintechs for embedded lending, they don’t have to choose between doing nothing or building new infrastructure from scratch. These partnerships allow FIs to offer fast, seamless and personalized capital solutions through the digital channels their customers already trust. It’s a way to show up for small businesses in moments that matter – and puts capital to work before a slowdown turns into a setback.
Embedded lending isn’t just a lifeline for the business owner, but also a growth engine for the financial institution. It deepens the FI’s role as a strategic partner, creates a stickier deposit relationship, expands revenue opportunities and positions them as an innovation-forward player without putting strain on internal personnel, systems or balance sheets.
This moment is a test of adaptability for both small businesses and the institutions that support them. Tariffs, inflation and shifting consumer expectations aren’t going away. What will separate the resilient from the rest is the willingness to innovate when your customers need you most. And for small businesses today, that time is now.
Discover the latest trends and insights—explore the Business Insights Journal for up-to-date strategies and industry breakthroughs!
