Platforms Expand SMB Lending as Working Capital Demand Rises

Small and medium-sized businesses (SMBs) ended 2025 sharpening their demand and reliance on platform-based working capital. Earnings disclosures indicate that those balances grew meaningfully year over year across major commerce ecosystems.

As commerce volumes fluctuate and operating expenses remain elevated, platforms that process payments and host storefronts are extending financing directly within their networks.

PYMNTS data underscore the appeal of relatively streamlined access to capital, particularly for smaller firms. As detailed last year in the PYMNTS Intelligence report, “How Retail Small Businesses Finance Survival in Uncertain Times,” a survey indicated that half of SMBs rely on day-to-day sales or existing bank balances to keep operating. The avenues of financing have traditionally been a bit narrow.

The report indicated that nearly one-third turn to personal credit cards when traditional financing is unavailable.

Shopify Capital: Loans and Advances Approach $1.8 Billion

Shopify’s Form 10-K shows that gross loans receivable reached $1.6 billion as of Dec. 31, 2025, compared with $1.1 billion as of Dec. 31, 2024. That represents approximately 43% year-over-year growth in gross loans.

When merchant cash advances through Shopify Capital are included, total loans and merchant cash advances, net of allowances, stood at $1.8 billion at year-end 2025, compared with $1.2 billion a year earlier.

The company purchased $4.2 billion of merchant cash advances and loans to Shopify merchants during 2025, compared with $3 billion in 2024, indicating acceleration in originations.

Credit metrics reflect portfolio growth. The allowance for credit losses related to uncollectible loans receivable increased to $160 million on Dec. 31, 2025, up from $110 million on Dec. 31, 2024. For merchant cash advances, the allowance rose to $35 million from $31 million.

Delinquency data show that 91.9% of merchant loans were current at the end of last year, compared with 93.7% as of Dec. 31, 2024.

PayPal: Merchant Finance Portfolio Grows 23%

PayPal reported that total merchant loans under U.S. PayPal Working Capital and PayPal Business Loans, advances and fees receivable outstanding, net of participation interest sold, were $1.8 billion as of the end of 2025, compared with $1.5 billion as of Dec. 31, 2024. The company states explicitly that this reflects 23% year-over-year growth. Per the filing, “the increase was due primarily to growth of approximately $190 million in our PayPal Business Loans product in the U.S. and growth in our PayPal Working Capital product portfolio of approximately $150 million, primarily in Germany, and to a lesser extent, in the U.S. and the U.K.”

Credit indicators shifted modestly. The percentage of merchant loans current declined to 89.8% from 90.4%. Allowance for merchant loans, advances and fees receivable increased to $170 million on Dec. 31, 2025, from $113 million Dec. 31, 2024. The filing attributes the increase in part to “broadened eligibility criteria” in 2024.

Block (Square Loans): Financial Solutions Drives Gross Profit

Block’s Q4 2025 shareholder letter identifies Square Loans as a primary driver of Financial Solutions performance. Square gross profit grew 7.5% year over year in the fourth quarter, driven primarily by Financial Solutions, “most notably Square Loans.” The company noted in its 10-K filing with the Securities and Exchange Commission that “we are able to underwrite these loans by using our unique data set of the seller’s Square transactions to help facilitate loan underwriting and collections. Generally, loan repayment occurs automatically through a fixed percentage of every card transaction a seller takes. Loans are sized to be less than 20% of a seller’s expected annual Square GPV.” The company’s filings indicate that there were $708.5 million in commercial loans held for sale at 2025’s close, compared with $404.8 million in the 2024 period.

Embedded Lending Becomes Structural

Across platforms, the pattern is consistent.

Earnings season therefore shows that working capital is not being sourced externally from traditional credit channels alone. It is being drawn directly from the platforms that already manage payment acceptance, subscription billing and merchant analytics. The Dec. 31, 2025 data confirm that embedded lending to SMBs is scaling in absolute terms.