Why merchants use working capital through the platforms they already use

Working capital is often described as a way to cover a cash shortage.

That is only part of the story.

When merchants seek financing through the software platforms, marketplaces, payments products, and business networks they already use, the reasons are often tied directly to business activity: buying inventory, purchasing equipment, expanding operations, pursuing new opportunities, managing cash flow, and keeping the business financially healthy.

Those themes show up in Kanmon merchant onboarding data. They also align with broader small-business research.

The Federal Reserve Banks’ latest Small Business Credit Survey found that the most common reasons small employer firms sought financing were to meet operating expenses and pursue an expansion or new opportunity.

That distinction matters.

Capital does not have to sit outside the core platform experience as an unrelated financial product. Used well, it can help a merchant create more capacity to do business—and, in many cases, more capacity to do business through the platform itself.

For platforms evaluating embedded lending, that creates the possibility of a genuinely complementary product: capital that helps customers grow while reinforcing the economic activity the platform was built to enable.

The financing need often starts inside the workflow

Consider when many working-capital needs actually arise.

• A distributor receives an unusually large order but needs to purchase the inventory first.
• A contractor has enough jobs in the pipeline to justify another vehicle or piece of equipment.
• A seller sees demand increasing for a product but cannot replenish inventory quickly enough with cash generated from prior sales.
• A logistics company has completed the work but is waiting for receivables while payroll, fuel, insurance, and other expenses continue.
• A growing business wants to hire, expand into a new location, or launch another product line before the resulting revenue begins arriving.

In each example, the financing need is connected to underlying business activity.

Increasingly, a platform may already see some portion of that activity.

The World Bank has highlighted this advantage specifically in embedded finance. Ecommerce platforms can use information such as merchant sales patterns and inventory to support underwriting, while logistics platforms can use delivery history and expected revenue to facilitate working capital for drivers and operators.

That is fundamentally different from asking a business owner to leave the software they use every day, find a lender, and explain their business from scratch.

What are merchants trying to accomplish with capital?

Across Kanmon merchant onboarding responses, several reasons consistently appear:

• Grow the business
• Purchase inventory
• Purchase equipment
• Expand operations
• Manage cash flow
• Maintain overall business financial health
• Cover unexpected expenses
• Start a new business line
• Refinance or consolidate existing debt

These are stated intentions when merchants apply, rather than verified post-funding expenditures. But they provide useful insight into how merchants themselves think about capital.

The dominant themes are not simply “I need a loan.”

They are closer to:

I have an opportunity. I need more capacity.

Or:

My cash does not arrive at the same time my expenses do.

Those are important distinctions for both the merchant and the platform.

1. Buying inventory when demand comes before cash

Inventory is one of the clearest examples of a productive working-capital use.

A business can have customers ready to buy and still be unable to serve them if it does not have enough inventory on hand. And the faster a company grows, the larger that timing problem can become.

Cash leaves the business when inventory is ordered. It may not return until the product arrives, sells, and the customer pays.

That creates a straightforward constraint:

Available cash can limit sales even when demand is healthy.

Financing can give a merchant the ability to stock more of a bestseller, prepare for a seasonal peak, place a larger supplier order, introduce another product, or avoid a stockout.

For the merchant, the potential benefit is more sellable capacity.

For a marketplace, commerce platform, or inventory-management system, that same investment may mean more products available to sell and more transactions flowing through the ecosystem.

The merchant and platform do not benefit for exactly the same reason.

But their interests can be aligned.

2. Purchasing equipment that unlocks capacity

Equipment presents a similar dynamic.

A service business may have more demand than its existing equipment can support. A contractor may need another vehicle. A manufacturer may need additional machinery. A healthcare provider may need specialized equipment to offer another service.

The constraint is not necessarily demand.

It is the ability to fulfill it.

Financing can allow the business to make an investment today that supports productive activity over a longer period.

Research published through the National Bureau of Economic Research found that increased access to financing was associated with greater productivity among financially constrained small firms, consistent with businesses being able to undertake productive projects that otherwise may not have happened.

That is an important way to think about working capital.

The most useful question may not be, “Does this business want financing?”

It may be:

What can this business do with capital that it cannot do today?

For a platform, the answer could be especially valuable when that additional capacity translates into more jobs, transactions, orders, invoices, or payments through the platform.

The equipment itself may sit outside the software.

The economic activity it enables may not.

3. Expanding when an opportunity appears

Businesses do not always grow gradually.

Opportunities can arrive all at once.

• A new customer places a significantly larger order.
• A business wins a major contract.
• A seller discovers demand in another market.
• A service company has an opportunity to enter a neighboring geography.
• A manufacturer could add another product line.

Those opportunities frequently require spending before they produce revenue.

That is why expansion remains a major reason businesses seek financing. In the Federal Reserve Banks’ 2026 Small Business Credit Survey, pursuing an expansion or new opportunity was among the most common reasons firms sought capital.

There is also evidence that capital can make a material difference when merchants have a productive use for it.

In 2025, Stripe published results from a two-year randomized controlled trial comparing businesses that accepted financing through Stripe Capital with similar businesses that did not have access to it. Businesses receiving financing subsequently grew their revenue on Stripe faster on average. The study also found particularly strong results among businesses that reported forward-looking plans for the money, including launching products, starting projects, and scaling the business.

The takeaway should not be that financing automatically produces growth.

It does suggest something more useful:

Capital can have the greatest value when a business already has somewhere productive to put it.

For platforms, that leads to a compelling question:

What could our customers do through our platform if access to capital were no longer the constraint?

4. Managing the gap between doing the work and getting paid

Not every useful deployment of capital involves buying something new.

Sometimes the problem is timing.

• A company can be profitable and growing while still experiencing cash pressure because receipts and expenses happen on different schedules.
• Employees need to be paid.
• Fuel gets purchased.
• Suppliers have payment terms.
• Taxes come due.
• Inventory needs to be reordered.

Meanwhile, customers may not pay for weeks.

The Federal Reserve’s small-business research consistently identifies operating expenses and uneven cash flow as significant financing challenges for businesses. Its latest survey found that operating expenses remained the most common reason firms sought financing.

This is particularly relevant in B2B markets, where completing a transaction and receiving payment may be separated by weeks or months.

Working capital can bridge that period.

The platform itself may also have unusually valuable context around the transaction.

A logistics platform, for example, may know that a load has been completed and payment is still pending. An invoicing platform knows an invoice has been issued. A marketplace knows that an order has been placed. A vertical software provider may see the underlying work that produced the receivable.

The World Bank specifically identifies ecommerce, logistics, and inventory-management platforms as environments where embedded finance can use this type of transactional context.

That is where embedded lending becomes more interesting than simply adding a financing tab to a product.

It can solve a problem inherent in the workflow itself.

5. Keeping a healthy business healthy

Businesses also seek capital simply to preserve flexibility.

That may mean maintaining liquidity, absorbing an unexpected expense, or keeping cash available rather than committing all of it to one investment.

This use of capital may sound less exciting than opening another location or purchasing a new piece of equipment.

But resilience creates options.

A business with little cash flexibility may turn down an otherwise attractive order because fulfilling it would stretch the company too far.

It may buy less inventory than demand warrants.

It may delay hiring.

It may defer a useful investment.

Or it may wait until a financing need becomes urgent before looking for a solution.

Capital can give an otherwise healthy business more ability to make decisions based on opportunity rather than simply the cash available on a particular day.

That distinction is especially relevant now. The OECD’s 2026 review of SME financing found that borrowing costs remain elevated relative to prepandemic levels in most countries it tracks, while constrained credit conditions continue to weigh on SME liquidity and investment. The report also notes the growing role of fintech and non-bank financing in the SME financing mix.

For a platform, financially healthier customers can also contribute to a healthier ecosystem.

A merchant that can continue accepting orders, purchasing goods, completing jobs, and serving customers is able to remain economically active within the platform.

6. Starting something new

Another productive use of capital is starting a new business line.

That could mean purchasing a new category of inventory, adding staff, investing in marketing, entering another channel, or building capacity for a service the company has not previously offered.

Again, the underlying problem is timing.

Investment happens first.

Revenue follows later—if the investment works.

Traditional financing may see primarily an application and the business’s financial history.

A platform may have additional context about the commercial activity surrounding the opportunity.

That proximity is one of the defining advantages of embedded finance.

McKinsey describes embedded finance as increasingly bringing financial services into the third-party platforms where customers are already conducting business, allowing financing to appear closer to the point at which the need arises. It also expects more SME financing, including products such as factoring, to migrate into ERP systems and supplier marketplaces.

For platforms, the strategic opportunity is not to become a lender simply because they can.

It is to decide whether capital can make the platform more useful for the businesses already there.

The goal is not more borrowing. It is more productive capacity.

This distinction matters.

The success of embedded lending should not be measured simply by whether more merchants borrow money.

The more meaningful outcome is whether financing allows merchants to undertake economically useful activity that cash timing otherwise would have constrained.

For a merchant considering capital, that means asking questions such as:

• Does this inventory purchase serve demand I already see?
• Will this equipment increase the amount of work I can perform?
• Is there a clear opportunity behind this expansion?
• Will bridging this receivable allow me to take on additional profitable work?
• What does the financing cost relative to the opportunity it enables?

Capital is not automatically productive because it is available. The use matters.

Merchants reporting forward-looking uses for financing experience stronger growth effects than other recipients.

For merchants, the question should therefore be less about simply gaining access to capital and more about identifying the constraint they want the capital to remove.

For platforms, financing can reinforce the core product

There is an equally important lesson for software platforms and marketplaces.

Offering embedded lending does not have to mean moving away from the core product.

The stronger strategy is to identify where lack of capital prevents customers from getting more value from what the platform already enables.

• For an ecommerce platform, the constraint might be inventory.
• For a logistics platform, it might be fuel, payroll, or the wait for an invoice to be paid.
• For field-service software, it might be equipment, vehicles, labor, or materials needed for the next job.
• For a B2B marketplace, it might be the gap between a supplier receiving a large purchase order and receiving payment.
• For a vertical SaaS platform, it may be another constraint specific to the economics of the industry it serves.

McKinsey’s embedded-finance research points to another reason this can be attractive to platforms: businesses increasingly encounter financial products through non-financial platforms, while the platform can continue owning the customer relationship and partner with a financial provider rather than building an entire lending operation itself.

That structure matters.

A platform can make capital available where it is relevant without having to turn its core business into lending.

With the right embedded lending partner, underwriting, funding, compliance, risk management, and servicing can remain behind the experience.

The platform keeps focusing on the customer and the workflow.

Look for the constraint closest to the transaction

Perhaps the best way for a platform to evaluate embedded lending is not to start with financing at all.

Start with the customer workflow.

• Where are otherwise-good customers constrained?
• Where do they have demand but insufficient inventory?
• Where is equipment limiting capacity?
• Where do payment terms create a gap between completing work and receiving cash?
• Where could customers accept more business if they had additional liquidity?
• Where does an opportunity require investment before revenue arrives?

Those are potential moments for embedded working capital.

The World Bank’s examples are instructive because the financing product is closely connected to the workflow: ecommerce data supporting seller financing, logistics data supporting driver working capital, and platform revenue helping facilitate repayment.

The closer capital sits to the activity it is intended to enable, the easier it can be for both merchant and platform to understand its purpose.

The platform already owns the moment

Businesses have always needed access to capital.

What embedded lending changes is where that access can happen.

• A platform may know when a business is selling more.
• It may know when an order occurs.
• It may see when inventory moves, when a job is completed, when an invoice is issued, or when a payment is expected.

Those are often the same moments when a working-capital need emerges.

Historically, the financing journey started somewhere else.

Embedded lending creates an opportunity to bring capital closer to the environment where the merchant is already running the business.

For the merchant, that can make financing another tool for turning an opportunity into action.

For the platform, it can help customers do more of what brought them to the platform in the first place.

That is where the incentives become mutually beneficial.

• More inventory can support more sales.
• More equipment can support more jobs.
• More liquidity can support more transactions.
• More capacity can support more growth.

Capital is valuable because of what it enables.

And when capital is offered through a platform already enabling the underlying business activity, its value can extend well beyond the financing product itself.

---

About the merchant insights

The merchant use cases discussed in this article are informed in part by reasons businesses selected when applying for financing through Kanmon.

They represent merchants’ stated intentions during onboarding and should not be interpreted as verified post-funding use of proceeds.

Sources

Federal Reserve Banks — 2026 Report on Employer Firms: Findings from the 2025 Small Business Credit Survey
National survey of small employer firms covering business performance, financing needs, application behavior, and reasons for seeking capital.
Read the Federal Reserve report

Stripe — Businesses grow revenue on Stripe faster after accepting financing through Stripe Capital
Results from a two-year randomized controlled trial examining the effect of access to Stripe Capital on subsequent merchant revenue growth, including findings related to forward-looking uses of funds.
Read the Stripe research

World Bank — World Development Report 2022, Chapter 4: Lending during the recovery and beyond
Discussion of embedded finance on ecommerce, logistics, and inventory-management platforms, including the use of platform data to facilitate SME working capital.
Read the World Bank chapter

National Bureau of Economic Research — Does Financing Spur Small Business Productivity? Evidence from a Natural Experiment
Research examining the relationship between greater access to financing, productive investment, and productivity among financially constrained businesses.
Read the NBER paper

OECD — Financing SMEs and Entrepreneurs 2026: An OECD Scoreboard
International review of SME financing conditions, including credit conditions, liquidity, investment, and the growing role of fintech and non-bank finance.
Read the OECD report

McKinsey & Company — Embedded finance: How banks and customer platforms are converging
Research on the migration of financial products into customer platforms, including SME lending, factoring, marketplaces, and platform-provider partnership models.
Read the McKinsey analysis

McKinsey & Company — Embedded finance: Who will lead the next payments revolution?
Analysis of embedded finance as an extension of the digital platforms businesses already use for commerce, accounting, inventory management, and other everyday workflows.
Read the McKinsey analysis