Offering B2B financing in your accounting firm: Here’s what you need to know.
Embedded financing is an emerging and rapidly-growing facet of the financial industry. Analysts forecast the embedded finance market will expand by a whopping 23.9% CAGR during the 2022-2029 period to reach over $770 million in value by 2029.
If you run an accounting firm, now is the best time to consider embedded financing as a new B2B offering. Let’s talk about how you can leverage the growing demand for this form of financing and the potential benefits that come with it.
Embedded finance or financing is simply the integration of financial tools, services, or products, like those you’d normally find in banks, within the offerings of non-financial firms. It essentially means providing bank-like services in a non-bank organization. Such services may include debit accounts, wallets, payments, and, of course, commercial and personal lending.
Nowadays, companies of all types, ages, and sizes in financially-strategic industries — such as retail, insurance, manufacturing, commodity supply, payments, and business management — are keen on adopting embedded financing as an additional product offering for specific consumer segments. In a recent survey of leaders in non-financial companies, 47% of U.S. respondents reported that their companies were actively planning and investing in launching embedded services in the near future.
But the concept of embedded finance is not exactly new. Several money-handling services, such as PayPal and Stripe, have been successfully offering credit products to their customers for years now. In a sense, accounting firms are in the money business too, which puts them in an excellent position to sell business financing.
If you think about it, the clientele is already there, and accountants have a pretty good idea of their clients’ business models, financial performance, and cash flow hurdles. So, it’s only a matter of designing funding products that appeal to your customers based on these pointers. You can start with low-cost, low-risk B2B lending products such as:
Embedded financing is a big part of alternative lending, an increasingly popular financing solution for small and medium-sized businesses and start-ups. Alternative (non-bank) lending lowers the barrier to entry for business financing. This way, SMB owners and first-time entrepreneurs can access favorable and convenient funding without jumping through tight hoops.
Besides, the loan approval rates in banks and similar financial institutions are significantly lower than those of alternative lenders, which is another reason more and more SMBs and start-ups opt for alternative financing.
So, embedded financing is obviously good news to borrowers, and the demand for it is clearly there. But what's in it for you — why should you even consider a lending service for your accounting business? To answer that, here are three attractive benefits of offering business lending to your CPA customers:
Implementing a business lending service will supplement your CPA revenue by opening a new income stream. Lending can earn you great passive returns through interest and fees. This is perhaps the strongest incentive for embedded financing, given how lucrative this space can be. For instance, in 2021, the embedded finance industry generated $4.2 billion, which marked a 180% revenue increase over the previous year.
The beauty of it is that you don’t have to invest a small fortune to get the new service rolling. Partnering with a co-branded lending solution will enable you to offer lending services to your accounting customers without incurring any overhead. Moreover, you’ll get to enjoy the benefits of continuous referral income.
Offering financing services adds tangible value to your CPA firm from the customer’s perspective. Ultimately, value-added services improve customer retention by building customer satisfaction and loyalty. Customers will most likely be drawn to your firm not only to have their books done but also to get a quick financing deal conveniently structured to meet their needs. They won’t have to look elsewhere for business funding. Plus, it makes a lot of sense to seek financial assistance from your accountant because there’s already an established level of transparency and credibility.
Most accounting firms offer consultancy and advisory services that guide clients toward financial success and away from expensive blunders. External funding is a common issue that many entrepreneurs often need advice on, which means you’ll be able to recommend your own financing solutions to clients who come to you seeking financial guidance. This is just one example of how lending can complement your main accounting venture.
In essence, being an accountant gives you a unique vantage point over your potential financing market and valuable insights into how to structure and drive your financing products.
There are many valid reasons to consider adding business financing to your suite of accounting services. For starters, a financing offering diversifies your income, increases your revenue, and binds customers to your company. While integrating financing in an accounting firm is quite alluring, putting the plan into action can prove daunting.
How would you design and structure the products/services to suit your audience, and more importantly, how would you engage potential and existing borrowers? Luckily, you don't have to worry about the logistics, product creation, or hiring extra hands to facilitate your new product offering — Loanspark can take care of all that for you.
We enable B2B companies to establish, sell, and maintain business financing solutions through our co-branded Business Lending-as-a-Service (BLaaS). We work hand in hand with businesses in the B2B space (accounting, banking, marketing, etc.) to realize their dream of bringing financial products to deserving borrowers. We will also help you customize and brand products with your specific target audience in mind. All this is done through a collaborative process where our team of finance and technology experts does all the heavy lifting.
Contact us to learn more on how to grow your revenue and increase your customer loyalty.